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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


LAW  LIBRARY 


-?■ 


/  , 


O'^W^ 


WILLIAMS  &  ROGERS  SERIES 

NEW 

COMMERCIAL   LAW 


BY 

A.  ]:^ORTO^  FITCH,  ESQ. 

OP  THE  TACOMA  (WASH.)  BAR 
FORMERLY  OF  THE  ROCHESTER  (N.  Y.)  BAR 


NEW  YOEK  . :  •  CINCINNATI  . :  •  CHICAGO 

AMEIUCAN   BOOK   COMPANY 


T" 


Entered  according  to  Act  oi  Congress,  in  the  year  i898, 

By  WILLIAMS  &  EOGERS 

1  n  the  Office  of  the  Librarian  of  Congress,  at  Washington,  D.C. 

vv.  p.  4 


i.T-  '■-  / 


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fi 


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i 

^  PREFACE, 


The  treatise  on  Commercial  Law  of  which  this  work  is  a  revision, 
was  issued  several  years  ago,  in  recognition  of  what  appeared  to  its 
publishers  a  well  defined  demand.  That  the  demand  was  real  has  been 
fully  demonstrated  by  the  wide  adoption,  large  sale,  and  great  popu- 
larity of  the  book. 

While  that  work  was  prepared  with  great  care  and  has  given  general 
satisfaction,  its  publishers  have  believed  for  some  time  that  if  certain 
changes  in  and  additions  to  the  text  were  made,  the  book  would  be  of 
still  greater  value  to  both  student  and  teacher.  With  this  object  con- 
stantly in  mind  the  revision  was  made,  and  it  is  hoped  and  believed 
that  the  improvement  sought  has  been  accomplished. 

The  original  plan  of  the  work  has  not  been,  materially  changed.  A 
number  of  the  topics  have  been  entirely  re-written,  and  several  new 
ones  added.  A  change  has  been  made  in  the  order  of  the  topics  for 
the  purpose  of  making  the  arrangement  more  systematic  and  logical. 
The  language  of  the  text  throughout  has  been  simplified,  and  the  typo- 
graphical arrangement  improved.  A  new  feature  of  the  work,  and  one 
which  it  is  thought  will  add  greatly  to  its  value,  is  the  citation,  in  foot 
notes,  of  the  statute  laws  of  the  various  states  and  territories,  which 
modify  or  annul  the  common  law  given  in  the  text.  These  citations 
are  very  complete,  and  adapt  the  book  for  use  in  all  parts  of  the  United. 
States. 

It  is  hoped  that  the  book  in  its  new  form  will  not  only  receive  the 
approval  of  those  for  whom  it  was  written  —  the  commercial  teachers 
and  students  of  this  country  —  but  also  aid  in  promoting  the  cause  of 
Business  Education. 


OONTEl^TS. 


PAGE. 

Law  in  General ^ 

/Contracts -  -  -      ^ 

/  Negotiable  Paper 51 

Guaranty  and  Suretyship 77 

Interest  and  Usury 83 

Sales  op  Personal  Property 87 

Bailments  of  Personal  Property 105 

Innkeepers —  113 

Common  Carriers 115 

Shipping 120 

^    Agency 127 

V  Partnership -'- 139 

Joint-stock  Companies 155 

y  Corporations 157 

Fire  Insurance 168 

Life  Insurance - -  -  175 

Marine  Insurance 179 

Patents,  Trade-marks,  and  Copyrights....... 184 

Real  Property - 187 

,  Real  Estate  CoN^^YANCES 192 

.    Landlord  and  Tenant 207 

Courts 212 

Pleading  and  Practice 217 

Glossary 224 

Forms 233 

Index  to  Forms 253 

Index  (  General  ) -  - 255 


CHAPTER   I. 


LA^^A^    IN    GENERAL. 


JOeflnition. — Law  in  its  broadest  sense  is  a  rule  of  action.  It  con- 
veys to  our  minds  the  idea  of  a  command  or  order  to  act  in  a  particular 
way,  given  by  some  power  capable  of  compelling  compliance  or  punish- 
ing disobedience.  Law  thus  defined  may  be  divided  into  three  general 
classes,  natural,  moral,  and  human.  Human  law,  with  which  alone  we 
have  to  deal  in  this  book,  is  any  rule  or  set  of  rules  prescribed  by 
human  beings  for  the  government  of  themselves  or  others. 

Universality. — It  is  only  because  of  the  existence  and  enforcement 
of  rules  of  conduct  that  men  can  live  together  peaceably  in  society.  It 
follows,  therefore,  that  every  state  or  nation  has  laws  for  the  govern- 
ment of  its  citizens,  controlling  both  their  personal  actions  and  their 
property.  These  laws  are  binding  within  the  boundaries  of  the  country 
where  they  are  found  and  by  which  they  are  made,  and  strangers 
within  the  country  must.obey  them  the  same  as  citizens;  so  all  property 
within  its  borders  is  subject  to  the  law  of  the  land,  no  matter  where 
its  owner  may  reside.  Outside  a  country,  its  laws  generally  have  no 
effect.  With  reference  to  object,  there  are  two  general  classes  of 
human  law,  civil  and  criminal. 

Criminal  Law  has  for  its  object  the  prevention  of  acts  which  destroy 
the  peace  and  harmony  of  society.  If  a  person  were  allowed  to  kill  his 
neighbor,  to  rob  him  of  or  destroy  his  property,  to  inflict  bodily  injury 
upon  him,  or  do  anything  of  like  nature,  the  passions  of  men  would 
keep  society  in  a  state  of  continual  strife;  the  strong  would  live  by 
preying  upon  the  weak,  and  an  advanced  state  of  civilization  would  be 
impossible.  Eules  forbidding  acts  of  this  kind  and  providing  for  the 
punishment  of  those  who  violate  them,  we  call  criminal  law. 

Civil  Law  is  composed,  of  those  rules  which  have  for  their  object  the 
enforcement  of  the  less  important  rights  of  individuals  against  each 
other;  those  rights  which  are  of  interest  principally  to  the  individual, 
and  do  not  have  such  an  important  bearing  upon  the  welfare  of  society. 
For  instance,  if  one  man  engages  to  work  for  another  upon  the  condi- 


6  LAW    IN    GENERAL. 

tion  that  he  is  to  be  paid  a  certain  sum  of  money  upon  completing  the 
work,  it  is  important  only  to  these  two,  and  to  those  depending  upon 
them,  that  he  be  paid.  Rules  which  have  for  their  object  the  enforce- 
ment of  such  obligations  as  these,  we  call  civil  law. 

Sources  of  Law. — In  this  country,  the  people  constitute  the  supreme 
authority,  and  we  must  look  to  them  collectively  for  the  establishment 
of  rules  governing  their  conduct.  We  find  that  from  time  to  time,  by 
their  duly  constituted  representatives,  they  have  adopted  constitutions 
— of  the  United  States  and  of  the  separate  states  ;  they  have  enacted 
statutes  —  in  Congress  and  the  state  legislatures;  and  they  have  given 
judicial  decisions  —  by  the  United  States  and  state  courts.  These  acts, 
however,  have  not  all  originated  law;  some  of  them  have  simply  declared 
the  law  already  in  existence.  Leaving  out  of  consideration  the  consti- 
tutions of  the  United  States  and  the  separate  states,  which  are  for  the 
protection  of  the  people  against  the  encroachments  of  the  government 
rather  than  for  the  protection  of  the  people  against  each  other,  and  the 
decisions  of  the  courts,  which  have  merely  declared  the  law  already  in 
existence,  we  have,  with  reference  to  source,  but  two  general  classes  of 
law  in  this  country,  common  law  and  statute  law. 

Common  Law  is  a  term  applied  to  that  part  of  the  law  of  England 
which  was  common  to  the  whole  country.  It  was  at  first  merely  a  body 
of  customs,  but  came,  in  time,  to  have  the  force  of  law,  and  was  called 
the  common  law  to  distinguish  it  from  those  laws  which  applied  only  to 
a  portion  of  the  country.  The  common  law  is  sometimes  called  the 
unwritten  law,  because,  being  originally  merely  a  body  of  customs,  it 
was  for  a  long  time  not  written.  As  soon  as  judges  began  to  render 
their  decisions  in  writing,  the  common  law,  being  embodied  in  these 
decisions,  became  written,  and  is  now  to  be  found  in  thousands  of  vol- 
umes of  reports  containing  the  decisions  of  the  courts  of  this  country 
and  England. 

Common  Law  in  the  United  States. — The  English  emigrants 
who  settled  this  country  being  familiar  with  the  common  law,  naturally 
continued  to  be  governed  by  it  on  this  side  of  the  Atlantic;  and  the 
countrv  having  since  been  settled  by  descendants  of  these  emigrants, 
the  common  law  has  been  carried  into  all  parts  of  the  country.'  We 
find  that  on  many  subjects  there  is  a  great  similarity  in  the  law  of  the 
different  states,  owing  to  the  common  law  being  its  basis.  A  large  part 
of  the  law  known  as  commercial  law,  or  the  law  of  business  transac- 


'  Tbe  state  of  Louisiana  is  an  exception  to  this.  That  state  was  first  settled  by 
the  Spaniards  who  brought  with  them  the  laws  of  their  native  countrj%  instead  of 
the  common  law.  The  law  of  Spain  was  founded  on  the  Roman  law,  so  that  the 
basis  of  the  law  of  Louisiana  is  Roman  instead  of  English  law. 


LAW   IN    GENERAL.  7 

tions,  is  common  law,  consequently  a  work  on  this  subject  is  applicable 
to  all  the  states. 

Statute  Law.  —  A  statute  is  an  act  of  a  legislature.  It  is  a  law 
formally  written  out  and  passed  by  a  legislative  body,  like  the  Congress 
of  the  United  States  or  the  legislature  of  a  state.  As  a  country  develops, 
the  old  laws  fail  to  meet  the  demands  of  the  jieople  and  new  ones  are 
necessary.  To  supply  this  demand,  each  state  has  its  legislature,  which 
meets  at  regular  intervals  for  the  purpose  of  making  such  changes  in  the 
law  and  such  new  laws  as,  in  its  judgment,  the  state  needs. 

National  Law. — There  are  some  subjects,  however,  which  are  of  gen- 
eral, ratlicr  than  of  local  importance,  and  which  concern  all  the  states 
alike.  For  instance,  the  regulation  of  commerce  with  foreign  nations 
and  between  the  states;  the  maintenance  of  an  army  and  navy;  a  post- 
office;  and  many  other  subjects  of  like  nature  are  of  interest  to  the 
whole  United  States  and  to  no  one  state  more  than  to  another.  For 
this  reason,  the  people  of  the  United  States  in  adopting  a  constitution  for 
the  national  government,  conferred  on  the  Congress  of  the  United  States 
sole  power  to  pass  laws  on  such  subjects,  and  provided  that  the  laws  so 
passed  should  be  of  equal  force  in  all  the  states.  The  laws  thus  passed 
by  Congress  and  the  state  legislatures  constitute  what  is  known  as 
statute  law,  and  take  the  place  of  the  common  law  whenever  they  come 
in  conflict  with  it. 

Relative  Authority. — In  a  country  which  has  so  many  different 
kinds  of  law  as  the  United  States,  it  is  necessary  that  there  be  some 
rule  as  to  which  shall  be  the  highest  in  authority.  The  constitution  of 
the  United  States  is  a  direct  expression  of  the  will  of  tlie  whole  people 
and  is,  therefore,  the  highest  in  authority.  It  provides  that  on  those 
subjects  which  come  within  the  province  of  the  general  government  the 
laws  of  Congress  shall  be  the  law  of  the  land,  any  law  of  a  state  to  the 
contrary  notwithstanding.  All  subjects  not  within  the  province  of  the 
general  government  are  left  within  the  control  of  the  states,  unless  the 
United  States'  constitution  expressly  prohibits  the  states  from  passing 
any  law  on  them.  On  subjects  within  the  control  of  a  state,  its  consti- 
tution, being  the  direct  expression  of  the  will  of  its  people,  is  supreme; 
and  next  to  this  come  the  laws  passed  by  its  legislature.  Underlying  all 
these  different  kinds  of  law,  most  extensive  by  far,  but  least  in  authority, 
is  the  common  law. 

Law  and  Property. — In  the  early  stages  of  society,  laws  are  com- 
paratively few,  because  there  is  little  to  regulate  except  personal  inter- 
course, and  only  a  small  number  of  rules  is  necessary  for  this  purpose. 
As  soon,  however,  as  the  rights  of  property  become  recognized,  and  the 
kinds  of  property  begin  to  multiply,  the  development  of  law  is  rapid. 


8  LAW   IN   GENBKAL. 

With  each  new  property  right  must  come  a  law  to  uphold  it.     The 
greatest  part  of  our  law,  therefore,  is  the  law  of  property. 

QUESTIONS. 

Define  law.  Give  its  general  divisions.  Of  which  does  this  book 
treat?  What  is  said  of  the  universality  of  law?  What  are  the  divisions 
of  human  law?  Define  criminal  law;  civil  law.  What  are  the  sources 
of  our  law?  Define  common  law;  statute  law.  What  kinds  of  statute 
law  have  we?  Define  each.  What  is  said  of  common  law  in  the  United 
States?  In  what  respects  is  there  similarity  in  the  law  of  the  different 
states?  diversity?  Give  the  relative  authority  of  the  different  kinds 
of  law.     What  is  said  of  the  relation  of  law  and  property? 


CHAPTER  II. 


CONTRACTS. 


Definition. — A  contract  is  an  agreement  between  two  or  more  per- 
sons, based  upon  sufficient  consideration,  to  do  or  not  to  do,  some 
particular  thing.  It  must  be  distinguished  from  a  mere  promise  where 
there  is  only  a  statement  on  the  part  of  one  person,  that  he  will  do,  or 
will  not  do  some  particular  thing,  without  any  obligation  on  the  part 
of  anyone  else. 

Extent. — Commercial  law  is  simply  the  law  of  contracts;  and  its 
different  branches,  such  as  negotiable  paper,  bailments,  agency,  part- 
nership, insurance,  etc.,  are  merely  the  different  kinds  of  contracts 
that  may  be  entered  into.  As  every  business  transaction  has  for  its 
foundation  a  contract,  so  all  business  law  is  built  upon  the  law  of 
contracts. 

Necessary  Conditions. — In  order  that  there  may  be  a  valid  con- 
tract, it  is  necessary  that  certain  conditions  be  fulfilled.  In  the  first 
place,  there  must  be  parties  legally  capable  of  making  a  binding  con- 
tract; second,  those  parties  must  give  their  consent  to  the  contract; 
third,  there  must  be  subject-matter,  or  something  contracted  about; 
and  last,  there  must  be  a  consideration,  that  is,  an  inducement  for 
each  party  to  enter  into  the  contract.  Each  one  of  these  conditions 
will  form  the  subject  for  a  subsequent  chapter.  Contracts  may  be 
divided  into  two  general  classes;  contracts  by  specialty,  and  parol 
contracts. 

Specialty. — A  contract  by  specialty,  or  a  "specialty"  as  it  is  briefly 
called,  is  a  contract  having  a  seal  attached  to  it;  the  familiar  examples 
are  bonds,  deeds,  and  mortgages.  The  seal  now  commonly  used  is  a 
piece  of  colored  or  gilt  paper,  of  any  shape  one  may  fancy,  attacheel 
to  the  document  immediately  after  the  name  of  the  person  signing  the 
same,  though  in  many,  in  fact  in  most  states,  a  simple  mark  or  scroll 
printed  or  made  with  a  pen  with  the  intention  of  calling  it  a  seal,  is 
all  that  is  required. 

The  earliest  use  of  seals  was  on  account  of  a  lack  of  ability  to  write, 

9 


10  CONTRACTS. 

and  they  were  consequently  used  alone  at  first;  but  as  the  ability  to 
write  became  more  general,  it  gradually  grew  into  favor  as  a  method  of 
siffnifvino^  assent.  Oa  account  of  the  readiness  and  convenience  with 
wliich  a  name  can  be  written,  and  the  inconvenience  of  using  a  seal, 
contracts  of  small  importance  came  in  time  to  be  signed,  the  seal  being 
omitted,  while  those  of  more  importance  were  both  signed  and  sealed. 
In  this  way  has  developed  our  custom  of  using  the  seal  on  conveyances 
of  real  estate,  such  as  deeds  and  mortgages,  and  on  bonds  and  other 
agreements  involving  important  interests.  The  use  of  the  seal  will  be 
discussed  more  at  length  in  the  chapter  on  real  estate  conveyances. 

Parol  Contracts. — A  parol  contract  is  any  contract  not  under  seal. 
As  the  great  bulk  of  the  world's  business  is  controlled  by  this  class  of 
contracts,  it  is  principally  of  them  that  we  will  treat  in  this  work.  A 
parol  contract  may  be  either  written  or  oral. 

Written  Contracts  are  those  in  which  the  terms  of  agreement  are 
written  or  printed  on  paper,  or  some  other  convenient  material,  and 
signed  by  the  parties.  The  advantages  of  having  a  contract  in  writing 
are  that  the  parties  may  know  just  how  each  understands  the  agreement, 
and  that  mistakes  on  account  of  a  failure  of  either  party  to  remember 
its  exact  terms  may  be  prevented  from  arising.  If  the  agreement  is 
written  down  and  preserved,  any  dispute  can  be  immediately  settled  by 
reference  to  the  writing. 

Oral  Contracts  are  those  in  which  the  agreement  or  understanding 
between  the  parties  is  arrived  at  by  means  of  spoken  words.  Generally 
oral  contracts  are  just  as  binding  as  written  ones,  the  only  difference 
being  in  the  difficulty  of  proving  them.  There  are,  however,  some 
exceptions  to  this.  Certain  contracts  which  will  be  discussed  in  a  sub- 
sequent chapter,  the  law  requires  to  be  written,  and  these,  of  course,  in 
order  to  be  binding  must  be  in  writing.  If,  however,  two  contracts  be 
made  about  the  same  subject  matter,  one  written  and  the  other  oral, 
the  written  one  must  be  followed.  Where  people  take  the  trouble  to 
write  down  an  agreement,  the  law  presumes  generally  that  they  mean 
just  what  they  have  written,  on  account  of  the  deliberation  with  which 
it  is  done.  If  A  enters  into  a  written  contract  with  B,  agreeing  to  pay 
him  a  certain  sum  of  money  at  a  certain  time,  although  they  may  have 
agreed  orally  at  the  time  of  making  the  contract  that  it  is  to  be  paid  in 
work,  or  is  not  to  be  paid  at  all,  excepting  under  certain  conditions, 
A  Avill  not  be  allowed  to  give  evidence  of  this  oral  agreement,  but  will 
be  compelled  to  pay  in  money,  without  regard  to  conditions.  Oral  con- 
tracts may  be  divided  into  express  contracts  and  implied  contracts. 

Express  Contracts  are  those  in  which  tiie  terms  are  expressly 
agreed  upon  and  stated,  and  each  party  expressly  agrees  to  perform  his 


CONTRACTS.  U 

part  of  the  contract.  For  example,  one  man  hires  out  to  work  for 
another  for  one  year  at  twenty  dollars  per  month  and  his  board.  The 
terms  of  the  contract  are  that  one  man  shall  work  for  the  other  for  a 
certain  time,  at  a  certain  kind  of  work,  which  he  expressly  agrees  to 
do,  and  that  the  other  shall  pay  him  twenty  dollars  per  month  and 
board  him,  which  he  expressly  agrees  to  do. 

Implied  Contracts  are  those  in  which  the  proposition  or  acceptance 
has  not  been  given  in  words,  but  is  left  to  be  implied  by  some  acts  of 
the  parties.  A  man  goes  into  a  store  and  asks  the  clerk  for  ten  pounds 
of  sugar;  the  clerk  wraps  up  the  sugar  and  the  man  walks  away  with 
it,  saying  nothing  about  payment.  He  has  not  expressly  agreed  to  pay 
for  the  sugar,  but  his  accepting  and  going  away  with  it  implies  a 
promise  on  his  part  to  pay  the  usual  price,  and  he  will  be  compelled 
to  fulfill  this  implied  agreement  just  the  same  as  if  he  had  expressly 
agreed  to  pay  for  the  sugar.  In  general  we  may  say,  that  where  one 
person  does  something  at  the  request  of  another,  there  is  an  implied 
promise  to  pay  its  reasonable  value,  unless  it  is  understood  by  both  that 
no  pay  is  expected. 

Freqwency  of  Implied  Contracts. — In  business  very  many  of  the 
contracts  involving  minor  matters  have  one  or  more  of  their  stipulations 
implied.  In  fact  there  may  be  said  to  be  an  implied  agreement  in 
every  express  contract,  that  the  parties  will  do  whatever  the  law 
requires  of  them,  in  carrying  out  the  terms  and  fulfilling  the  conditions 
that  are  expressed. 

Executed  and  Executory  Contracts. — An  executed  contract  is 
one  in  which  the  thing  agreed  upon  has  been  done;  when  it  has  not 
been  done  it  is  executory.  If  one  party  has  performed  his  part  but  the 
other  has  not,  it  is  executed  on  one  side  and  executory  on  the  other. 
When  a  contract  has  been  executed,  it  really  ceases  to  be  a  contract, 
and  simply  signifies  rights  acquired  by  contract.  This  division  into 
executed  and  executory  is  important,  because  when  we  come  to  treat  of 
contracts  that  are  not  binding,  we  sh;ill  find  that  many  which  cannot  be 
enforced  while  executory  become  binding  on  the  parties  when  executed, 
and  cannot  then  be  rescinded. 

Entire  and  Divisible. — An  entire  contract  is  one  in  which  an  entire 
performance  on  the  part  of  one  party  must  precede  i)erformance  by  the 
the  other.  A  makes  a  contract  with  B  to  erect  a  house  for  him  accord- 
ing to  certain  plans  and  specifications,  and  is  to  receive  therefor  a 
certain  sum,  when  completed.  This  is  an  entire  contract,  and  the 
house  must  be  completed  according  to  agreement  before  any  pay  can 
be  collected.  If  A  should  partly  finish  the  house  and  then  leave  it,  he 
could  recover  nothing  for  his  work. 


12  CONTKACTS. 

Divisible  contracts  are  those  in  which  complete  performance  by  one 
party  is  not  necessary  before  anything  can  be  required  of  the  other. 
A  agrees  to  sell  B  twenty-five  tons  of  hay  at  six  dollars  per  ton.  This 
is  divisible,  unless  there  is  some  special  agreement  to  the  contrary,  and 
if  for  some  cause  or  other  only  ten  tons  are  delivered,  payment  for 
this  amount  can  be  enforced.  There  is  a  strong  tendency  on  the  part 
of  the  courts  in  most  states  to  consider  all  contracts  divisible  where  it 
can  be  done  without  injury  to  the  parties.  In  such  cases  the  party  is 
allowed  compensation  to  the  full  value  of  what  he  has  done,  but  is  made 
to  pay  whatever  damages  may  have  resulted  from  his  partial  failure. 

QUESTIONS. 

Define  contract.  What  is  said  of  the  extent  of  the  law  of  contracts? 
State  the  necessary  conditions  of  a  valid  contract.  What  are  the 
general  classes  of  contracts?  Define  specialty;  seal.  What  is  the 
object  of  using  seals?  Define  parol  contract;  give  divisions.  Define 
written;  oral.  Give  advantages  of  each.  Give  division  of  oral;  define 
each.  Give  examples.  What  can  you  say  of  the  frequency  of  implied 
contracts?  Define  executed  contract;  executory;  entire;  divisible. 
Give  examples  of  each. 


CHAPTER  III. 


PARTIES. 


Competent. — Generally  speaking,  all  persons  may  bind  themselves 
by  contract  in  any  manner  they  please.  The  law  presumes  that  they 
are  able  to  judge  for  themselves  about  the  kind  of  contracts  they  wish 
to  make,  and  the  terms  of  them.  There  are,  however,  some  exceptions 
to  this  rule,  both  as  to  the  persons  who  may  enter  into  a  contract,  and 
the  subjects  about  which  they  may  contract.  As  we  shall  see  in  a 
subsequent  chapter,  there  are  certain  subjects  about  which  all  persons 
are  forbidden  to  make  contracts;  and  as  we  shall  see  in  this  chapter, 
there  are  certain  persons  who  are  forbidden  to  make  contracts  for  the 
reason  that  the  law  considers  them  unable  to  judge  of  their  own  wants. 
With  reference  to  parties,  the  rule  then  is  that  all  persons,  except  those 
who  are  forbidden,  can  make  contracts  to  suit  themselves,  about  any 
legal  subject. 

Void  and  Voidable. — Contracts  made  by  incompetent  persons  are 
regarded  in  law  in  two  ways:  they  may  be  either  void  or  voidable.  A 
void  contract  is  one  which  is  absolutely  of  no  effect  from  the  beginning, 
and  under  which  no  one  can  acquire  any  rights.  It  cannot  be  enforced 
by  either  party.  A  voidable  contract  is  one  that  is  binding  at  the  time 
it  is  made,  but  may  be  declared  by  one  of  the  parties  not  binding  on 
himself,  and  is  then  not  binding  upon  either.  Usually,  in  the  case  of 
voidable  contracts,  only  one  party  has  the  right  to  declare  it  of  no 
effect,  it  being  binding  on  the  other  until  so  rescinded. 

Incompetent. — Those  declared  by  law  to  be  incompetent  are  insane 
persons,  idiots,  drunkards,  married  women,  and  alien  enemies. 

Insane. — All  persons  born  with  ordinary  mental  capaciry  who  have, 
through  disease  or  otherwise,  lost  the  use  of  the  reasoning  faculty,  are 
insane.  This  class  includes  all  grades,  from  those  who  are  violent  and 
dangerous  to  those  who  are  simply  unsound  in  some  particular  direction, 
or  on  some  particular  subject,  having  ordinary  mental  capacity  on  all 
others.     The  terms  lunacy  and  insanity  are  used  frequently  as  meaning 

13 


14  CONTRACTS. 

the  same  thing,  but,  strictly  speaking,  a  lunatic  is  an  insane  person 
who  has  rational  intervals. 

The  general  rule  as  to  the  competency  of  this  class  of  persons  is  that 
the  contracts  of  an  insane  person  are  not  binding  upon  him.  This 
must  be  taken  with  several  qualifications.  A  person  insane  in  some 
particular  direction  and  rational  in  all  others,  will  be  bound  by  a  con- 
tract made  by  him  on  a  subject  not  affected  by  his  insanity.  A  lunatic 
will  be  bound  by  a  contract  made  during  a  rational  or  lucid  interval. 
Of  course,  in  order  to  avoid  a  contract  on  the  ground  of  insanity,  the 
fact  that  the  person  was  insane  when  he  made  it  must  be  proved  like 
any  other  fact.  In  most  states  provision  is  made  for  what  are  called 
inquisitions  of  lunacy.  In  such  cases  when  a  person  is  supposed  to  be 
insane,  application  is  made  to  the  judge  of  the  proper  court  for  a 
trial  to  determine  his  sanity  or  insanity.  If  it  is  decided  that  he  is 
insane,  a  guardian  is  appointed  to  look  after  him  and  his  affairs,  and 
after  that  all  contracts  made  by  him,  without  the  guardian's  consent, 
are  absolutely  void. 

Idiots  are  those  Avho  are  born  with  such  a  deficiency  of  mental 
capacity  that  they  are  incapable  of  receiving  education,  and  on  account 
of  this  deficiency  never  acquire  ordinary  understanding  or  judgment. 
Lacking  the  capacity  to  carry  on  the  business  which  is  necessary  for 
support,  an  idiot  is  placed  under  charge  of  a  guardian,  who  is  to  look 
after  all  his  affairs,  and  see  that  he  does  not  want  for  the  common 
comforts  of  life.  This  guardian  will  usually  be  the  parent  of  the  idiot, 
but  if  his  parents  are  both  dead,  a  guardian  will  be  appointed,  usually 
by  the  probate  judge  of  the  county  in  which  he  lives.  The  fact  that 
the  person  is  an  idiot  is  established  by  an  inquisition  in  the  same  way  as 
insanity.  The  rule  as  to  competency  which  we  applied  to  insanity  will 
apply  to  idiocy.    An  idiot's  contracts  are  generally  not  binding  upon  him. 

Drunkards. — Drunkenness  is  a  kind  of  temporary  insanity,  and 
most  of  the  law  of  insanity  regarding  competency  applies  to  it.  A 
contract  made  by  a  jjcrson  in  a  state  of  intoxication  is  generally  not 
binding  upon  him.  The  person  seeking  to  avoid  a  contract  on  the 
ground  of  intoxication  must  show  that,  at  the  time  the  contract  was 
made,  he  was  so  intoxicated  as  to  be  deprived  of  the  use  of  reason. 
Partial  intoxication  is  not  suJBBcient,  though  it  will  frequently  be  evi- 
dence of  fraud,  and  may  lead  to  the  avoidance  of  the  contract  on  that 
ground.  A  person  wishing  to  escape  from  the  terms  of  a  contract  on 
the  ground  of  intoxication,  must  rescind  the  contract  within  a  reason- 
able time  after  becoming  sober.  Where  a  person  has  become  intoxi- 
cated for  the  purpose  of  practicing  fraud  by  entering  into  a  contract 
afterwards  to  be  avoided,  the  law  will  not  allow  him  to  take  advantage 


PARTIES.  15 

of  his  intoxication.  In  some  states  provision  is  made  that  in  case  a 
person  habitually  becomes  intoxicated,  he  can  be  tried  in  the  same  way 
as  a  person  who  is  supposed  to  be  insane,  and  declared  an  habitual 
drunkard.  Where  this  is  done  a  guardian  is  appointed,  and  after  that 
all  contracts  made  by  the  drunkard  without  the  consent  of  the  guard- 
ian are  void,  whether  at  the  time  of  making  them  he  was  actually 
intoxicated  or  not. 

Infants. — Infants  are  commonly  understood  to  be  those  who  are 
under  seven  years  of  age,  but  in  the  sense  of  the  law  all  who  have  not 
reached  the  age  of  majority — all  minors — are  infants.  By  the  common 
law,  majority  for  both  sexes  was  twenty-one  years.  Of  course  it  is  not 
presumed  that  the  arrival  of  a  person  at  the  age  of  twenty-one  years 
effects  any  great  change  in  his  mental  capacity,  but  it  is  known  that 
young  persons  are  not  capable  of  judging  for  themselves  in  the  common 
affairs  of  life,  and  some  period  must  be  fixed  which  may  be  said  to  be 
the  age  at  which  people  generally  arrive  at  the  age  of  discretion. 
Twenty-one  has  been  thought  to  come  the  nearest  to  applying  to  all 
cases,  and  has  accordingly  been  adopted  in  this  country  as  the  age  of 
majority.^  The  statutes  of  a  few  states  have  changed  this  in  the  case 
of  females  so  that  they  become  of  age  at  eighteen"  or  at  marriage.^ 
The  minor  becomes  of  age  on  the  day  preceding  his  twenty-first  birth- 
day." Since  an  infant  is  not  presumed  capable  of  attending  to  business 
affairs,  his  contracts,  like  those  of  the  classes  before  spoken  of,  are 
generally  not  binding  upon  him. 

Disaffirmance  is  a  refusal  to  be  bound  by  the  terms  of  a  voidable 
contract.  It  can  be  given  by  a  person  who  was  incompetent  at  the 
time  the  contract  was  made,  and  while  it  is  usually  given  by  the  in- 
competent party,  when  the  other  seeks  to  enforce  performance  of  the 
contract,  it  may  be  given  at  any  other  time.*    When  a  contract  is  dis- 


'  In  Kansas,  Arkansas,  Texas,  Alabama,  Mississippi,  Louisiana,  and  perhaps  in  a 
few  others,  the  statutes  allow  a  minor  under  certain  circumstances  to  obtain  a  de- 
cree of  court  rendering  him  of  age  for  all  purposes  of  property  and  contract. 

*  This  is  so  in  the  following  states:  Vermont,  Ohio,  Illinois,  Iowa,  Minnesota, 
Kansas,  Nebraska,  Maryland,  JMissouri,  Arkansas,  California,  Colorado,  Oregon, 
Nevada,  Washington.  N.  Dakoto,  S.  Dakota,  and  Idaho. 

*  So  in  Oregon,  Maryland,  Texas,  Washington,  if  her  husband  is  of  full  age,  and 
Maine.  In  Nebraska  if  she  is  over  sixteen  she  attains  her  majority  on  marriage. 
In  Iowa,  Texas,  and  Louisiana  all  minors,  male  and  female,  attain  their  majority 
on  marriage. 

*  In  California  and  New  York,  a  minor  is  not  of  age  until  his  twenty-first  birthday. 

*  In  Kansas  and  Iowa  an  infant  must  disaffirm  within  a  reasonable  tim  ;  after 
reaching  majority  or  he  cannot  do  so  ai  all.  A  failure  to  so  disaffirm  in  those  states 
amounts  to  a  ratification. 


16  CONTRACTS. 

affirmed,  it  becomes  wholly  void  from  that  time,  and  the  party  disaffirm- 
ing it  is  entitled  to  recover  whatever  he  has  paid,  but  must  return 
anything  he  has  received. 

Ratification  is  agreeing  to  be  bound  by  the  terms  of  a  voidable 
agreement.  It  of  course  can  only  be  given  after  the  incompetency 
which  made  the  contract  voidable  is  removed;  in  case  of  an  infant, 
after  attaining  majority;  in  case  of  a  lunatic  or  drunkard,  after  he 
becomes  possessed  of  the  use  of  his  reason.  Ratification  may  be  by 
express  promise  to  be  bound  by  the  terms  of  the  contract,*  or  by  show- 
ing an  intention  to  retain  its  advantages.  Thus,  if  a  person,  after 
attaining  majority,  keeps  proj)erty  bought  before  majority,  and  makes 
no  offer  to  return  it,  he  will  be  presumed  to  have  ratified  the  contract 
by  which  he  obtained  it. 

Contracts  for  Necessaries. — To  the  foregoing  rules  regarding 
voidable  contracts,  there  is  an  exception  where  they  are  made  for  the 
purpose  of  obtaining  the  necessaries  of  life.  Contracts  for  the  neces- 
saries of  life,  made  by  incompetent  persons,  are  binding  on  them  the 
same  as  though  they  were  competent,  with  the  qualification,  that  if 
they  have  agreed  to  pay  an  unreasonable  price,  they  can  only  be  com- 
pelled to  pay  what  the  goods  are  reasonably  worth.  The  rule  which 
makes  voidable  the  contracts  of  the  persons  mentioned  above,  is  for  the 
purpose  of  protecting  those  who  lack  ordinary  mental  ability,  and  this 
exception  is  for  the  same  purjjose.  If  it  were  not  for  this  exception  a 
minor  with  plenty  of  property  might  suffer  from  actual  want,  because 
no  one  would  furnish  him  necessaries  for  fear  of  not  being  paid.  As  it 
is,  necessaiies  can  be  furnished  him,  and  he  is  amply  protected  by  the 
rule  that  he  can  be  made  to  pay  only  what  the  goods  are  reasonably 
worth. 

By  necessaries  of  life  are  meant  not  only  those  things  which  are 
absolutely  necessary  to  support  life,  but  whatever  is  proper  for  the 
person's  station  in  life.  Just  what  are  necessaries  must  be  determined 
by  the  circumstances  of  each  particular  case;  what  w^uuld  be  necessaries 
for  one  person  would  be  luxuries  for  another.  Among  necessaries  for 
all  persons  are  included  proper  food,  clothing,  lodging,  and  a  common 
school  education. 

Married  'Women. — At  common  law,  a  married  woman  was  said  to 
have  no  legal  existence,  her  identity  being  merged  in  that  of  her  hus- 


'  In  the  following  states  a  ratification  in  order  to  be  binding  must  be  an  express 
promise  in  writing  and  signed  by  the  party  ratifying  it ;  Maine,  New  Jersey, 
Virginia,  West  Virginia,  Kentucky,  Missouri,  Arkansas,  South  Carolina,  and 
Mississippi 


PARTIES.  Vi 

baud.  All  her  personal  property  at  marriage  became  his,  and  he 
became  responsible  for  her  debts;  she  was  consequently  unable  to  enter 
into  any  mercantile  contracts,  it  being  presumed  that  all  her  wants 
would  be  provided  for  by  her  husband.  This  old  idea  has  been  to  a 
large  extent  abandoned,  until  now  a  great  many  of  the  states  have 
passed  laws  giving  married  women  the  right  to  control  their  separate 
property,  and  make  contracts  concerning  it.*  In  all  the  states  where 
these  privileges  have  not  been  granted,  there  has  been  some  modification 
of  the  common  law  in  her  favor,  showing  that  the  tendency  is  toward 
liberality  in  this  respect. 

Alien  Enemies. — Subjects  of  a  country  with  which  our  country  ia 
at  war,  are  called  alien  enemies,  and  contracts  made  with  an  alien 
enemy  ai"e  void.  All  traffic  with  an  enemy  during  war  is  forbidden, 
because  if  it  were  allowed  there  might  result  a  diversity  of  interests 
between  a  government  and  its  subjects.  A  manufacturer  in  one  country 
might  be  making  large  sums  of  money,  by  furnishing  a  merchant  in  the 
other  country  with  the  products  of  his  factory,  the  demand  for  which 
had  been  created  by  the  war,  and  would  cease  with  its  close.  Manifestly, 
then,  the  interests  of  the  manufacturer  would  be  promoted  by  a  contin- 
uation of  hostilities,  and  might  lead  him  not  only  to  refuse  aid  to  his 
own  government,  but  actually  to  assist  the  enemy.  This  principle  of 
law  is  of  no  effect  except  in  time  of  war. 


'  In  the  following  states  and  territories  a  married  woman  owns  her  separate 
property  and  can  make  contracts  concerning  it  the  same  as  if  unmarried  :  Ariz- 
ona, Arkansas,  California,  Colorado,  North  Dakota,  South  Dakota,  Delaware,  Dis- 
trict of  Columbia,  Illinois,  Indiana,  Iowa,  Kansas,  Maine,  Maryland,  Massachusetts, 
Michigan,  Minnesota,  Mississippi,  Missouri,.  Montana,  Nebraska,  Nevada,  New 
Hampshire,  New  Jersey,  New  Mexico,  New  York,  Ohio,  Oregon,  Pennsylvania, 
South  Carolina,  Utah,  Virginia,  Washington,  Wisconsin,  Wyoming.  In  Vermont 
if  she  is  engaged  in  separate  business.  In  Alabama  with  husband's  consent  in 
writing.  In  several  of  these  states  some  qualifications  of  this  rule  will  be  found 
which  must  be  determined  by  reference  to  the  statutes. 

QUESTIONS. 

Who  are  competent  to  contract?  Distinguish  between  void  and  void- 
able. Who  are  incompetent  to  contract?  What  is  an  insane  person? 
Distinguish  between  insanity  and  lunacy.  Give  the  rule  as  to  the 
competency  of  an  insane  person.  How  is  insanity  determined?  Define 
idiot.  Give  rule  as  to  competency.  Define  drunkard.  Give  rule  as  to 
competency.  What  must  be  shown  in  order  to  avoid  a  contract  on  the 
ground  of  intoxication  ?  Define  habitual  drunkard.  Define  infant; 
majority.     What  differences  exist  in  the  different  states  as  to  the  age 


18  CONTRACTS. 

of  majority?  Grive  the  rule  as  to  the  competency  of  an  infant.  Define 
disaffirmance.  By  whom  can  it  be  given?  when?  Define  ratification. 
By  whom  can  it  be  given?  when?  how?  Are  there  any  exceptions 
to  the  foregoing  rules  regarding  competency?  Give  reason.  What 
are  necessaries?  Give  the  old  rule  as  to  the  competency  of  married 
women?  How  has  this  been  modified  in  this  country?  Define  alien 
enemy.     Give  rule  as  to  competency.     Give  reason  for  this  rule. 


CHAPTER   IT. 


CONSENT. 


Definition. — As  we  have  seen,  one  of  the  essential  elements  of  every 
binding  contract  is  mutual  assent  or  consent;  that  is,  the  parties  must 
agree  to  the  same  thing,  in  the  same  sense.  Until  they  have  thus 
agreed,  there  can  be  no  contract.  Consent  may  be  divided  into  two 
elements,  proposition  and  acceptance. 

Proposition. — A  proposition  is  the  offer  to  make  a  contract.  It  can 
be  divided  into  two  elements,  a  request,  and  an  inducement  held  out 
to  the  other  party  to  comply  with  the  request.  For  example,  A  asks  B 
to  sell  him  his  horse  for  one  hundred  dollars;  that  is,  he  requests  B  to 
let  him  have  his  horse,  and  as  an  inducement  for  him  to  comply  with 
the  request,  says  he  will  give  him  one  hundred  dollars.  These  two 
elements  constitute  a  proposition.  A  proposition  may  be  oral  or  writ- 
ten, and  in  either  case  may  be  conditional  or  general. 

Acceptance  is  agreeing  to  comply  with  the  terms  of  a  proposition, 
and  may  be  given  orally  or  in  writing.  A  proposition,  as  we  have  seen, 
is  merely  an  offer  to  make  a  contract;  but,  when  the  acceptance  has 
been  given,  it  becomes  binding  on  both  parties;  the  minds  have  met 
and  the  contract  is  complete.  It  is  not  necessary,  however,  that  the 
acceptance  of  an  offer  be  expressly  given.  It  may  be,  and  as  a  matter 
of  fact  frequently  is,  implied  from  acts  or  circumstances.  The  accept- 
ance, however,  in  order  to  make  a  binding  contract,  must  be  uncon- 
ditional. For  example,  A  offers  to  sell  B  a  horse  for  one  hundred 
dollars,  and  B  agrees  to  accept  the  offer,  provided  he  be  allowed  one 
year  in  which  to  pay  the  money;  this  would  be  a  conditional  accept- 
ance, and  in  effect  is  merely  a  new  proposition,  which  A  can  accept  or 
reject  as  he  pleases. 

Oral  Proposition. — An  oral  proposition  is  made  by  means  of  spoken 
words.  It  is  usually  made  with  the  expectation  that  it  will  be  accepted 
at  the  time  and  place  where  it  is  made,  and  must  be  accepted  at  that 
time  and  place  in  order  to  bind  the  proposer,  unless  time  is  given  in 
which  to  accept.  Where  nothing  is  said  to  the  contrary,  it  is  under- 
stood that  an  oral  proposition  remains  open  only  a  very  short  time,  and 
unless  accepted  immediately  is  considered  to  be  withdrawn.     Generally 

19 


20  CONTRACTS. 

it  must  be  accepted  before  the  parties  separate,  in  order  to  make  a  con- 
tract. If  time  is  given  in  which  to  accept,  it  may  be  accepted  within 
that  time,  but  even  if  time  is  given,  unless  the  proposer  is  paid  for 
keeping  the  offer  open,  he  may  withdraw  it  at  any  time  before  accept- 
ance, whether  the  time  has  expired  or  not. 

Written  Propositions  are  usually  made  by  mail  or  telegraph,  or  by 
a  formal  written  contract  drawn  up  to  be  signed  by  both  parties.  In 
most  cases  of  written  contracts,  the  contract  and  consequently  the 
proposition  is  made  orally  first,  and  the  written  instrument  is  simply  a 
written  statement  of  the  agreement.  Where  the  offer  is  made  by  letter, 
some  time  must  necessarily  elapse  before  it  can  be  accepted,  and  the 
offer  in  the  mean  time  continues  open  for  days  or  weeks,  but  the  mo- 
ment tbe  letter  of  acceptance  is  mailed,  the  contract  is  complete.  Hence 
it  would  seem  to  follow  that,  even  if  the  letter  is  lost  or  destroyed  after 
it  is  mailed,  and  so  not  received,  yet  the  contract  has  been  completed, 
and  the  parties  are  bound.  Whether  this  is  true  or  not  depends  upon 
the  circumstances,  and  can  only  be  determined  in  view  of  the  facts  of 
each  case. 

Illustration. — A  grain  factor  at  Chicago  writes  to  a  miller  in  Eoch- 
ester  on  the  tenth  day  of  January,  offering  to  sell  him  five  thousand 
bushels  of  wheat  at  eighty-seven  cents  per  bushel.  The  miller  receives 
the  offer  January  12th,  and  on  the  evening  of  the  same  day  mails  a  letter 
containing  his  acceptance,  post-paid  and  properly  addressed  to  the  fac- 
tor in  Chicago.  From  that  moment  the  contract  is  binding.  On  the 
11th  of  January  the  factor,  concluding  that  he  does  not  care  to  sell  the 
wheat  at  that  price,  writes  and  mails  to  the  miller  another  letter  with- 
drawing his  offer  of  the  day  before.  This  letter  was  written  and  mailed 
twenty-four  hours  before  the  offer  was  actually  accepted,  but  it  does  not 
release  the  factor,  because  it  Avas  not  received  until  after  the  offer  was 
accepted.  In  such  cases  the  person  receiving  the  offer  has  a  right  to 
presume  that  it  is  continuing  until  he  is  actually  notified  of  its  with- 
drawal. The  factor  might  have  telegraphed  his  withdrawal,  and  thus 
prevented  acceptance. 

Conditional  Proposition.— A  proposition  may  have  any  condition 
attached  to  it  that  pleases  the  proposer,  and  in  order  to  make  a  con- 
tract, the  acceptance  must  be  in  accordance  with  the  condition.  For 
instance,  the  proposer  may  specify  that  the  acceptance  must  be  in 
writing,  sealed  or  unsealed,  within  a  specified  time,  at  a  certain  place, 
etc.,  and  an  acceptance  must  be  in  the  way  specified. 

General  Proposition.— A  proposition  may  be  made  general,  that 
is,  to  no  particular  person  but  to  all  persons,  and  a  contract  will  be 
made  by  tlie  acceptance  of  any  one.     Fur  example,  an  auctioneer  may 


CONSENT.  21 

put  up  an  article  agreeing  to  sell  it  ut  a  certain  price.  The  sale  is  com- 
plete as  soon  as  some  one  accepts  the  offer  and  agrees  to  give  this  price. 
A  reward  may  be  offered  for  finding  and  returning  a  lost  article,  or  for 
the  arrest  and  conviction  of  a  criminal,  and  any  one  on  performing  the 
required  act  is  entitled  to  the  reward. 

What  Assent  Implies. — When  assent  is  given  to  a  contract,  it  im- 
ples  that  the  parties  have  understood  the  terms  of  the  agreement  and 
that  they  have  voluntarily  given  their  consent  to  them.  Consequently 
where  they  have  not  understood  the  terms  of  the  agreement,  or  wliere 
the  consent  has  not  been  freely  given,  there  has  not  been  the  assent 
which  the  law  requires,  and  there  is  no  contract.  Examples  of  failure 
to  comply  with  these  conditions  are  assenting  to  a  contract  under  du- 
ress, through  fraud,  and  mistake. 

Duress  is  some  threat  or  danger  of  physical  harm  or  unlawful  arrest, 
used  with  a  view  of  compelling  assent  to  a  contract.  A  contract  made 
under  duress  is  voidable,  and  may  be  rescinded  by  the  party  who  has 
thus  given  assent.  In  order  to  constitute  duress,  there  must  be,  or  ap- 
pear to  be,  actual  danger  of  bodily  harm  or  unlawful  arrest.  If  the 
arrest  which  is  threatened  is  merely  a  threat  of  lawful  prosecution, 
or  the  threatened  injury  is  merely  to  property,  it  will  not  constitute 
duress. 

Fraud  is  any  deception  or  misrepresentation  used  with  the  intention 
of  securing  assent  to  an  agreement,  when  such  assent  would  not  other- 
wise be  given.  Fraud  may  operate  to  induce  assent  in  several  ways. 
The  misrepresentation  may  be  such  as  to  make  the  acceptor  think  the 
terms  of  the  contract  are  different  from  what  they  really  are  ;  that  is, 
he  may  sign  an  instrument  under  the  impression  that  it  says  one  thing, 
when  in  fact  it  says  another.  Again,  it  may  be  such  as  to  make  the 
party  believe  the  effect  of  the  contract  is  different  from  what  it  really 
is.  He  has,  in  fact,  assented  to  the  contract  as  it  really  is,  but  under  a 
misapprehension  as  to  its  effect. 

Fraud,  whatever  be  its  nature,  vitiates  the  contract,  and  leaves  the 
defrauded  J^arty  at  liberty  to  rescind  the  agreement.  The  contract  is 
not  absolutely  void  but  only  voidable.  The  party  who  has  been  de- 
frauded may  rescind  the  contract  if  he  chooses,  or  he  may  treat  it  as 
valid,  and  hold  the  other  strictly  to  the  performance  of  his  part  of  the 
agreement.  This  is  an  advantage  which  the  law  gives  to  the  innocent 
party;  but  if  he  wishes  to  declare  the  contract  not  binding,  he  must  do 
so  promptly,  or  he  will  be  presumed  to  have  assented  to  it.  The  fraud 
must  be  such  as  to  actually  deceive  the  party,  in  order  to  make  the 
contract  voidable.  If  he  sees  the  fraud  but  accepts,  notwithstanding 
it,  he  cannot  rescind  the  contract.     So  he  must  use  the  diligence  to 


22  CONTRACTS. 

avoid  deception  that  would  naturally  be  expected  under  the  circum- 
stances, or  he  cannot  take  advantage  of  the  fraud  to  rescind  the  con- 
tract. If  a  person  allows  himself  to  be  cheated  through  his  own  negli- 
gence, the  law  will  not  come  to  his  assistance. 

Mistake.  —  The  law  does  not  allow  much  latitude  for  mistakes, 
though  where  a  contract  is  based  upon  a  mutual  mistake,  it  is  not  bind- 
ing. The  mistake  must  be  mutual;  a  mistake  of  one  party  not  known 
to  the  other,  and  not  made  by  the  other,  will  not  prevent  the  enforce- 
ment of  the  contract.  For  instance,  I  buy  a  watch  of  a  jeweler  sup- 
posing it  to  be  silver,  but  say  nothing  to  him  about  it.  He  sells  it  to 
me  knowing  it  is  nickel  and  not  knowing  that  I  think  it  is  silver.  The 
fact  that  I  was  mistaken  about  the  watch  will  be  no  ground  for  the 
rescision  of  the  contract,  unless  the  jeweler  did  or  said  something  with 
the  intention  of  misleading  me  as  to  its  real  value.  If  the  jeweler  also 
supposed  the  watch  to  be  silver,  and  sold  it  to  me  as  such,  this  would 
be  a  mutual  mistake;  that  is,  made  by  both  parties,  and  would  make 
the  contract  void.  It  frequently  happens  that,  through  a  mistake  in 
the  use  of  language,  parties  in  entering  into  a  written  contract  do  not 
say  in  the  contract  what  they  intended.  In  such  cases  the  courts  will 
sometimes  change  the  contract  to  mean  what  both  parties  supposed  it  to 
mean,  if  it  can  be  clearly  proved  that  its  meaning  is  not  what  they 
intended.  If  the  intention  of  the  parties  cannot  be  ascertained  with 
certainty,  the  contract  will  not  be  changed,  but  will  be  declared  void 
because  of  mutual  mistake. 

QUESTIONS. 

Define  consent.  Of  what  elements  is  it  composed?  Define  proposi- 
tion. Of  what  elements  is  it  composed?  Give  examj^le.  In  what  ways 
may  a  proposition  be  made?  Define  acceptance.  How  may  it  be  given? 
Define  oral  proposition.  "What  is  said  of  the  acceptance  of  an  oral 
proposition?  withdrawal?  Define  written  projiosition.  How  are  they 
usually  made  ?  What  is  said  of  their  acceptance  ?  Give  example. 
Define  conditional  proposition.  What  is  said  of  its  acceptance?  What 
is  a  general  proposition  ?  What  is  said  of  its  acceptance?  What  does 
assent  to  a  contract  imply?  Give  examples  of  failure  to  fulfill  these 
conditions.  Define  duress.  Give  its  effect.  Define  fraud.  In  what 
way  may  it  influence  a  party  to  assent  to  a  contract?  Give  its  eflFect. 
What  is  the  effect  of  a  mistake  in  making  a  contract?  Define  mutual 
mistake.     How  may  it  sometimes  be  rectified? 


CHAPTER  Y. 


CONSIDERATION. 


Jfature  and  Necessity. — The  consideration  is  the  reason  or  induce- 
ment on  which  the  parties  consent  to  be  bound  by  contract.  As  we 
have  seen,  a  proposition  consists  of  two  parts,  a  request  and  an  induce- 
ment held  out  to  the  party  to  whom  it  is  made,  to  comply  with  the 
request.  This  inducement,  whatever  it  may  be,  is  the  consideration. 
We  cannot,  however,  always  refer  to  one  part  of  a  contract  as  the 
consideration.  Which  part  is  the  consideration  depends  on  how  the 
contract  is  regarded,  since  each  part  is  the  consideration  for  the  other. 
A  agrees  to  sell  B  a  horse  for  one  hundred  dollars.  The  consideration 
for  A's  promise  is  the  receiving  of  the  money,  and  the  consideration  for 
B's  promise  is  the  receiving  of  the  horse. 

It  is  an  ancient  and  well  established  rule  of  law  that  no  promise  can 
be  enforced  unless  it  rests  upon  a  consideration.  There  are,  however, 
two  exceptions  to  this  rule;  one  is  in  the  case  of  sealed  instruments, 
which  are  said  to  import  a  consideration,  that  is  none  need  be  proved; 
the  other  exception  is  in  the  case  of  negotiable  paper  in  the  hands  of 
an  innocent  j)urchaser.  Consideration  is  sometimes  divided  into  two 
general  classes,  good  and  valua^ble. 

Good  Consideration  consists  in  natural  love  and  affection  existing 
between  relatives.  A  father  may  be  induced  by  affection  for  his  son  to 
present  him  a  team  of  horses,  or  anything  else  of  value,  and  this  affec- 
tion which  induces  him  to  make  the  present  is  said  to  be  a  good  con- 
sideration, because  it  will  support  the  promise.  Such  a  consideration, 
however,  will  only  support  a  promise  after  it  has  been  executed.  The 
son  can  hold  the  property  after  he  has  received  it;  but  if  after  the 
promise  is  made,  the  father  decides  he  does  not  want  to  fulfill  it,  the 
son  cannot  compel  performance.  Even  in  an  executed  contract  such  a 
consideration  is  not  sufficient  when  the  rights  of  third  parties  are  con- 
cerned. If  the  father  was  in  failing  financial  circumstances  when 
he  gave  the  property  to  his  son,  his  creditors  could  interfere,  have  the 
conveyance  set  aside  and  the  property  sold  to  satisfy  their  claims. 

Valuable  Consideration. — A  valuable  consideration  is  an  induce- 
ment of  value,  and  may  be  a  benefit  to  the  promissor,  or  a  loss  or  incon- 

23 


34  CONTRACTS. 

venience  to  the  promisee.  A  agrees  to  give  B  a  horse  owned  by  him 
in  consideration  of  receiving  one  hundred  dollars;  this  one  hundred 
dollars  is  a  valuable  consideration  which  is  a  benefit  to  the  promisor. 
If  A  should  agree  to  give  B  the  horse  if  he  would  give  the  one  hundred 
dollars  to  0,  this  would  be  a  valuable  consideration,  and  a  detriment  to 
the  promisee.  As  a  matter  of  fact,  nearly  all  considerations  belong  to 
both  of  the  classes.  Persons  do  not  generally  enter  into  an  obligation 
without  receiving  some  benefit  in  return,  nor  do  they  usually  receive  a 
benefit  without  the  other  party  sustaining  a  corresponding  loss,  conse- 
quently valuable  considerations  are  usually  a  benefit  to  the  promisor, 
and  a  loss  to  the  promisee. 

Adequacy.  —  It  is  not  to  be  understood  that  the  obligation  entered 
into,  or  the  thing  j^erformed  by  one  party,  must  be  equal  to  the  con- 
sideration which  he  receives  for  it.  A  consideration  is  sufiicient  if  it 
be  a  substantial  one;  that  is  one  possessing  some  value,  although  it 
may  not  be  adequate.  The  law  presumes  that  each  party  is  able  to 
determine  for  himself  whether  he  is  receiving  an  equivalent  for  what 
he  gives,  consequently  unless  there  is  evidence  of  fraud,  the  contract 
will  be  supported  if  he  has  received  anything. 

Accord  and  Satisfaction  is  a  compromise  settlement  of  a  disputed 
claim,  or  a  settlement  by  giving  something  else  than  what  was  agreed 
upon  when  the  contract  was  made.  Where  there  is  a  genuine  contro- 
versy as  to  the  amount  of  a  debt,  the  payment  of  part  of  what  is  claimed 
by  the  creditor  is  a  consideration  for  the  release  of  the  balance.  Unless 
there  is  a  dispute  about  the  amount  of  the  debt,  a  payment  of  a  part  is 
not  a  consideration  for  a  release  or  extension  of  the  time  of  payment 
of  the  remainder,  since  in  paying  a  part  the  debtor  has  done  only  what 
he  is  bound  to  do,  and  the  agreement  is  without  consideration.  If, 
however,  the  part  is  paid  before  it  is  due,  this  will  be  a  su£Bcient  con- 
sideration for  extension  of  time  or  release  of  the  remainder.  So,  also, 
giving  additional  security  for  a  debt  before  it  is  due,  is  sufficient  con- 
sideration for  an  extension  of  the  time  of  payment. 

Mutual  Promises. — A  promise  may  be  a  consideration  for  a  promise; 
but  in  order  that  one  promise  support  the  other  it  is  necessary  that 
they  both  be  made  at  the  same  time.  A  promise  made  to-day  would 
not  be  a  sufficient  consideration  for  one  made  yesterday,  unless  yester- 
day's promise  be  renewed.  The  principle  that  one  promise  is  a  consid- 
eration for  another  is,  in  popular  ideas,  sometimes  applied  to  subscrip- 
tion papers,  all  who  sign  them  being  regarded  as  held  on  the  ground 
that  each  promise  is  a  consideration  for  the  others.  This,  however,  is 
not  strictly  true.  A  promise  of  a  voluntary  contribution  is  not  usually 
binding  unless  something  is  paid  for  it.     If  the  paper  be  signed  with 


CONSIDERATION.  25 

the  understanding  that  the  money  is  to  be  paid  in  case  a  certain 
amount  is  raised,  the  promise  becomes  binding  when  that  amount  is 
subscribed. 

Insufficient  Consideration. —  Every  promise  or  obligation  wliich 
serves  as  an  inducement  is  not  a  sufficient  consideration  to  uphold  a 
contract.  There  are  several  kinds  of  inducements  which  will  not  serve 
as  a  consideration,  but  the  most  important  of  these  are  those  which  are 
illegal,  impossible,  and  moral  obligations. 

Illegal. — A  promise  to  do,  or  the  doing  of,  an  act. which  is  illegal,  is 
not  a  sufficient  consideration  to  support  the  promise  of  another.  A 
note  given  to  pay  for  suppressing  a  criminal  prosecution,  or  for  the 
violation  of  a  law,  or  for  defrauding  a  person,  or  for  the  commission  of 
any  act  contrary  to  law,  is  void  for  want  of  a  sufficient  consideration. 

Impossible. — So  a  promise  to  do  an  act  which  is  in  its  very  nature 
wholly  impossible,  is  not  a  sufficient  consideration  to  support  a  contract. 
The  impossibility  must  be  apparent,  however,  and  in  the  nature  of  the 
promise  itself.  A  mere  pecuniary  impossibility,  owing  to  a  lack  of 
funds,  is  not  a  legal  impossibility.  So  if  the  imjDossibility  has  arisen 
by  reason  of  the  fault  of  the  promisor,  or  if  it  was  an  impossibility  that 
might  have  been  readily  foreseen,  it  will  not  relieve  him. 

Moral  Oblig-ation. — A  purely  moral  obligation  is  not  a  sufficient 
consideration  to  support  a  contract.  A  son  in  good  circumstances  is 
morally  bound  to  support  an  indigent  parent,  but  a  promise  made  by 
the  son  to  pay  for  articles  already  furnished  to  the  parent  by  another  is 
not  binding  for  want  of  consideration.  But  if  the  articles  were  fur- 
nished at  the  son's  request,  made  before  they  were  furnished,  his  promise 
to  pay  for  them  becomes  binding;  and  his  promise,  if  not  made  ex- 
pressly, will  be  implied  from  the  request. 

Executed  Consideration. — Where  a  benefit  has  been  enjoyed,  or  a 
loss  or  inconvenience  suffered,  and  in  consideration  of  it  a  promise  to 
do  or  pay  something  is  afterwards  made,  such  benefit,  loss,  or  incon- 
venience is  termed  an  executed  consideration;  that  is,  it  has  been  exe- 
cuted or  finished  before  the  promise  is  made.  Such  a  consideration  is 
not  sufficient  to  support  a  promise.  A  physician  treats  a  patient  who 
is  very  poor.  Afterwards  some  benevolent  person  learns  the  fact  and 
agrees  to  pay  the  physician  for  his  services,  but  the  promise  is  not  bind- 
ing for  want  of  a  sufficient  consideration.  If,  however,  the  services  had 
been  rendered  at  the  request  of  the  person  making  the  promise,  his 
subsequent  promise  would  bind  him.  This  previous  request  will  be  pre- 
sumed where  the  person  jDromising  has  derived  a  personal  benefit  from 
such  past  consideration.     A  performs  some  work  for  B  in  the  absence 


26  CONTRACTS. 

of  B  and  without  his  knowledge;   B  afterwards  accepts  the  benefits  of 
the  work  and  promises  to  pay  for  it;  this  promise  will  bind  him. 

Failure  of  Consideration. — Where  a  consideration  apparently  valu- 
able and  sufficient  turns  out  to  be  nothing,  or  a  consideration  originally 
sufficient  becomes  wholly  valueless  before  part  performance  on  either 
side,  there  is  said  to  be  a  failure  of  consideration.  Where  the  consid- 
eration totally  fails,  the  contract  is  void.  Thus  a  note  given  to  make 
and  sell  a  patented  machine,  becomes  void  in  the  hands  of  the  original 
holder  if  the  patent  turns  out  to  be  void.  If  the  failure  is  only  partial, 
leaving  a  substantial  though  less  valuable  consideration,  this  may  be 
sufficient  to  support  the  contract;  but  if  the  contract  is  divisible,  the 
party  who  has  lost  by  the  failure  can  have  a  proportionate  reduction 
in  his  promise,  or  in  the  amount  he  has  to  pay. 

QUESTIONS. 

Define  consideration.  Where  is  it  necessary  ?  What  kinds  are 
there?  Define  good  consideration.  Where  is  it  sufficient?  Wherein- 
sufficient?  Define  valuable  consideration.  What  may  it  be?  What  is 
said'of  the  adequacy  of  consideration?  What  is  said  of  accord  and  satis- 
faction as  a  consideration?  Give  examples.  Give  the  rule  regarding 
promises  as  a  consideration.  When  sufficient?  Give  the  rule  regard- 
ing subscription  papers.  What  can  you  say  of  insufficient  considera- 
tion? illegal?  impossible?  moral  obligation?  Give  examples.  Give 
effect  of  previous  request  on  moral  obligation.  Define  executed  consid- 
eration.  Give  example.  What  can  you  say  of  its  sufficiency?  What 
is  failure  of  consideration?     Give  its  effect. 


OHAPTEE   VI. 


SUBJECT    MATTER. 


Definition.  —  The  fourth  condition  of  a  valid  contract  is  subject 
matter;  that  is,  there  must  be  something  definite  which  forms  the  sub- 
ject of  the  agreement,  something  to  be  done  or  left  undone.  This, 
whatever  it  may  be,  is  the  subject  matter  of  the  contract. 

Legality.  —  The  rule  applied  to  the  competency  of  parties  can  be 
applied  to  the  legality  of  subject  matter.  Anything  may  be  legally  the 
subject  matter  of  a  contract  wldch  the  laiu  does  not  forbid.  Therefore, 
if  we  wish  to  know  whether  a  particular  subject  matter  is  legal,  we 
must  look,  not  to  see  if  it  is  allowed,  but  if  it  is  forbidden. 

Illegality. — Contracts  on  subjects  which  the  law  says  shall  not  be 
the  subject  matter  of  a  contract  are  absolutely  void,  and  cannot  be 
enforced  by  either  party.  This  rule,  however,  applies  only  to  execu- 
tory contracts.  If  a  contract  with  illegal  subject  matter  is  voluntarily 
executed,  it  is  the  same  as  though  the  contract  had  been  originally  good. 
The  law  will  not  compel  the  return  of  anything  paid  under  such  a 
contract  any  more  than  it  will  compel  performance.  In  case  the  con- 
tract is  only  partially  executed,  the  party  whose  part  is  still  executory 
may  refuse  both  to  execute  his  part  of  the  agreement  and  to  refund 
what  he  lias  received.  There  are  three  general  classes  of  contracts  that 
are  void  on  account  of  illegal  subject  matter,  viz:  those  which  are 
against  public  policy,  immoral,  and  fraudulent. 

Against  Public  Policy.— All  contracts  which,  if  enforced,  would 
be  contrary  to  the  good  of  the  public  or  opposed  to  the  welfare  of  tlie 
community,  are  said  to  be  against  public  policy,  and  are  therefore  void. 
A  large  number  of  contracts  come  under  this  head,  but  the  principal 
subdivisions  are  those  in  restraint  of  trade,  in  restraint  of  marriage, 
perversive  of  the  acts  of  government,  and  obstructive  to  the  course  of 

justice. 

In  Restraint  of  Trade.— An  agreement  not  to  carry  on  a  particu- 
lar trade  or  business,  which  is  lawful  or  beneficial  to  the  community 
and  the  individual,  is  void  because  its  enforcement  would  be  against 
public  policy.  A  contract  upon  sufficient  consideration  in  partial 
restraint  of  trade  may  be  valid,  as  where  one  agrees  not  to  carry  on  a 

27 


38  CONTRACTS. 

particular  trade  or  business  iu  a  certain  locality;  but  an  agreement  not 
to  carry  on  any  business,  or  a  particular  business  anywhere,  is  illegal 
and  void.  The  rule  then  is  that  a  reasonable  restraint  may  be  legal 
while  an  unreasonable  restraint  is  always  void.  Just  what  restraint  is 
reasonable  is  a  question  for  the  court  to  decide  in  view  of  the  circum- 
stances of  each  particular  case. 

Contracts  in  partial  restraint  of  trade  usually  arise  in  the  sale  of 
what  is  known  as  the  good  will  of  a  business.  Where  a  business  is  well 
established  there  is  a  likelihood  that  the  old  customers  will  continue  to 
patronize  the  place,  no  matter  who  owns  it,  and  this  likelihood  is  called 
the  good- will.  Where  one  buys  a  business  it  is  frequently  stipulated 
that  the  party  selling  shall  not  engage  again  in  the  same  business  in  the 
same  place,  in  order  that  the  purchaser  may  secure  the  trade  of  the  old 
customers.  This  is  called  the  sale  of  the  good-will,  and  is  valid  although 
it  is  in  partial  restraint  of  trade,  because  it  is  not  unreasonable. 

In  Restraint  of  Marriage. — The  same  rule  applies  to  contracts,  the 
object  of  which  is  to  prevent  marriage,  as  to  those  in  restraint  of  trade. 
A  reasonable  restraint  is  allowable,  but  an  unreasonable  one  is  not. 
Not  only  is  a  contract  not  to  marry  for  an  unreasonable  time  void,  but 
where  a  will  is  made  granting  money  or  property  to  a  person  on  condi- 
tion that  he  remains  unmarried  for  an  unreasonable  length  of  time,  the 
restriction  is  void  and  the  legacy  is  taken  without  it.  What  is  a  reason- 
able restraint  must  be  decided  by  the  court,  according  to  the  circum- 
stances of  each  particular  case. 

As  refraining  from  marriage  is  opposed  to  public  policy,  so  are  hasty 
and  ill-advised  marriages;  consequently  what  are  called  marriage  bro- 
kerage contracts,  contracts  for  the  payment  of  money  or  other  compen- 
sation for  procuring  a  marriage,  are  void.  Nor  is  it  necessary  in  order 
to  make  such  a  contract  void,  that  the  marriage  procured  be  actually 
ill-advised  and  unsuitable;  it  is  void  without  regard  to  the  propriety  of 
the  marriage. 

Perversive  of  the  Acts  of  Government. — The  proper  exercise  of 
the  powers  of  government  is  for  the  public  good,  consequently  any 
agreement  intended  to  prevent  the  proper  application  of  such  powers 
is  void  as  being  against  public  policy.  Such  are  all  contracts  to  pay  for 
services  rendered  in  securing  election  to  a  public  office;  contracts  with  a 
private  person  to  influence  the  acts  of  a  public  officer  by  addressing  to 
him  other  than  public  considerations;  also,  contracts  for  services  as  a 
lobbyist  in  favor  of  or  against  a  bill  before  a  legislature.  Of  course 
this  does  not  include  contracts  to  pay  for  openly  presenting  facts  or 
making  appeals  to  an  officer  in  the  regular  course  of  his  business,  such 
as  hiring  a  lawyer  to  appear  before  a  court  or  at  an  appointed  hearing 


SUBJECT    MATTER.  29 

before  a  legislative  committee,  but  it  simply  refers  to  influence  used 
privately  and  outside  of  official  hours. 

Obstructive  to  the  Course  of  Justice. — Ail  contracts,  the  purpose 
of  which  is  to  obstruct  the  course  of  justice,  are  void  as  being  against 
public  policy.  Thus  an  agreement  not  to  prosecute  a  thief  if  the  stolen 
goods  are  returned,  is  void  as  obstructing  the  course  of  justice.  The 
same  is  true  of  contracts  to  abstain  from  testifying  as  a  witness  in  a 
suit;  to  procure  witnesses  to  swear  to  a  particular  thing;  or  to  pay  a 
witness  more  if  one  party  succeeds  than  if  he  does  not. 

Immoral. — The  second  class  of  contracts  which  have  illegal  subject 
matter  is  that  which  has  an  immoral  tendency.  Any  contract  to  do 
an  immoral  act,  or  to  do  that  which  will  be  prejudicial  to  the  morals 
of  the  community,  is  void.  The  principal  contracts  which  come  under 
the  head  of  immoral,  are  those  relating  to  obscene  publications,  Sunday 
desecration,  and  bets  or  wagers. 

Obscene  Publications  have  a  tendency  to  corrupt  the  morals  of  a 
people,  consequently  a  contract  for  the  publication  of  books,  pictures, 
etc.,  coming  under  this  head  is  void.  In  many  states  special  laws  have 
been  enacted  for  the  suppression  of  such  publications,  making  tlie  act 
of  publication  a  punishable  offense. 

Sunday  Desecration. — Statutes  have  been  adopted  in  all  the  states 
prohibiting  worldly  business  on  the  Sabbath,  and  all  contracts  for  the 
performance  of  labor,  or  any  other  act  which  the  statute  forbids,  are  void. 
Such  contracts  are  not  void  at  common  law,  consequently  whether  a 
contract  for  the  performance  of  a  particular  act  on  Sunday  is  void,  can 
only  be  determined  by  reference  to  the  statutes  of  the  state  in  which  it 
is  to  be  performed.  This  refers  to  contracts  made  on  a  week  day  to  be 
executed  on  Sunday,  but  in  some  states  the  statutes  forbid  entering 
into  a  contract  on  Sunday;  and  where  this  is  true,  any  contract  made 
on  Sunday,  no  matter  what  its  subject  matter,  is  void. 

Bets  or  Wagers.  —  At  the  common  law,  all  bets  or  wagers,  the 
tendency  of  which  is  contrary  to  public  policy,  or  to  the  corruption  of 
morals,  such  as  on  the  result  of  an  election  or  a  judicial  trial,  a  prize 
fight,  etc.,  were  illegal  and  void.  Money  placed  in  the  hands  of  a  stake- 
holder in  such  cases  could  be  recovered  at  any  time  before  payment,  but 
not  afterwards.  In  many  states  all  betting  and  gaming  are  prohibited 
by  statute;  so  also  are  lotteries  and  raffles.  Where  such  is  the  case,  all 
contracts  founded  on  a  wager,  or  lottery,  or  any  chance,  or  uncertain 
event  are  void.  In  some  cases  money  paid  on  such  a  contract  can  be 
recovered.  Reference  must  be  had  to  the  statutes  to  determine  the  law 
of  each  state.     Where  there  is  no  statutory  provision,  only  those  wagers 


30  CONTRACTS. 

are  void  which  have  an  immoral  teudency,  or  a  tendency  contrary  to 
public  policy,  as  at  common  law. 

Fraudulent. —  The  third  class  of  contracts  void  because  of  illegal 
subject  matter,  is  where  the  purpose  is  fraudulent,  that  is  to  defraud  a 
third  person.  The  cases  of  contracts  for  the  purpose  of  defrauding 
third  parties,  occur  most  frequently  in  contracts  relating  to  insolvent 
laws,  auction  sales,  and  assignments. 

lusolvent  L<aws. — In  some  states  it  is  provided  by  statute  that  where 
a  person  has  more  debts  than  he  has  property  or  means  to  pay,  he  can 
pay  each  creditor  a  certain  portion  of  his  claim  and  be  discharged  from 
all  further  liability.  In  some  cases  it  is  provided  that  he  can  do  this 
only  with  the  consent  of  all  the  creditors.  An  agreement  on  the  part  of 
an  insolvent  debtor  to  give  one  creditor  a  larger  proportion  of  his  claim 
or  better  security  than  the  others  in  order  to  induce  him  to  withdraw 
his  objection  to  such  a  discharge,  is  void  because  it  is  for  the  purpose 
of  defrauding  the  other  creditors. 

Auction  Sales  are  a  means  of  converting  property  into  its  actual 
value  in  money,  by  offering  to  buyers  fair  and  free  competition.  The 
employment  by  the  seller  of  persons  as  by-bidders,  who  are  to  make 
bids  for  the  sole  purpose  of  forcing  up  the  price,  and  with  the  under- 
standing that  they  are  not  to  be  held  responsible  for  their  bids,  is  a 
fraud  upon  honest  bidders.  Where  such  fraudulent  bids  are  used,  the 
buyer  is  under  no  obligation  to  accept  the  property  if  the  bid  immedi- 
ately preceding  his  was  fraudulent.  So  where  persons  who  want  the 
same  article  agree  that  some  of  them  shall  abstain  from  bidding  and 
share  the  profits  of  buying  it  cheaply,  such  agreements  are  a  fraud  upon 
the  seller,  and  consequently  void. 

Assignments. — Where  a  debtor  in  failing  circumstances  assigns  or 
transfers  his  property  to  another,  for  the  purpose  of  keeping  it  out  of 
the  hands  of  his  creditors,  such  a  transfer  is  a  fraud  upon  them  and  can 
be  set  aside.  Between  the  parties  themselves,  however,  such  an  assign- 
ment is  binding.  A  person  making  such  an  assignment  cannot  recover 
the  property,  although  his  creditors  can. 

QUESTIONS. 

Define  subject  matter.  What  may  be  the  subject  matter  of  a  contract? 
What  effect  has  illegality  of  subject  matter  on  executed  contracts  ? 
Give  the  general  classes  of  contracts  that  are  void  because  of  illegal 
subject  matter.  What  is  meant  by  against  public  policy?  What  kinds 
of  contracts  are  against  public  policy?  What  is  meant  by  contracts  in 
restraint  of  trade?    Distinguish  between  reasonable  and  unreasonable 


SUBJECT    MATTER.  31 

restraint.  In  what  kinds  of  contracts  does  this  restraint  most  fre- 
quently arise?  What  do  you  understand  by  contracts  in  restraint  of 
marriage  ?  Wiiat  is  said  of  reasonable  and  unreasonable  restraint  ? 
What  is  a  marriage  brokerage  contract?  What  is  said  of  its  effect  ? 
Wiiat  contracts  are  perversive  of  the  acts  of  government?  Give  ex- 
amples. What  is  said  of  their  effect?  What  contracts  are  obstruct- 
ive of  the  course  of  justice  ?  Give  examples ;  effect.  What  is  said 
of  contracts  witii  an  immoral  tendency?  Give  the  principal  contracts 
that  come  under  this  head.  Give  the  effect  of  contracts  for  the  per- 
formance of  worldly  labor  on  Sunday;  of  contracts  made  on  Sunday. 
What  is  a  wagering  contract?  Give  its  effect.  How  may  a  fraudulent 
contract  have  illegal  subject  matter?  To  what  does  it  usually  relate? 
What  are  insolvent  laws?  How  do  they  give  rise  to  fraudulent  con- 
tracts? How  do  auction  sales  give  rise  to  fraudulent  contracts?  What 
is  an  assignment?    How  may  it  be  fraudulent?    Vfhat  effect  has  it? 


CHAPTER  Til. 


REMEDIES. 


Definition. — A  remedy  is  the  legal  means  employed  to  enforce  a 
right  or  redress  an  injury.  Where  two  persons  enter  into  a  contract, 
certain  rights  are  thereby  created;  that  is,  each  has  a  right  to  demand 
performance  on  the  part  of  the  other.  A  farmer  enters  into  a  contract 
with  a  grain  dealer  to  sell  to  the  grain  dealer  one  thousand  bushels 
of  wheat  at  eighty  cents  per  bushel.  The  contract,  the  moment  it  is 
entered  into,  establishes  the  right  of  the  dealer  to  have  the  wheat  de- 
livered to  him,  according  to  the  terms  of  the  agreement,  and  the  riglit 
of  the  farmer  to  be  paid  the  price.  If  either  refuses  to  perform  his 
part  of  the  agreement,  it  is  an  infraction  of  the  other's  rights,  and  con- 
stitutes what  is  called  a  breach  of  the  contract.  Such  rights  would  be 
of  no  value  without  some  power  to  enforce  them,  or  to  compensate  the 
party  who  has  suffered  by  reason  of  their  violation.  This  power  the 
law  possesses  through  the  means  called  remedies.  Remedies  are  divided 
into  two  general  classes,  criminal  and  civil. 

Criminal. — A  criminal  remedy  is  the  means  provided  by  law  for  the 
punishment  of  a  violation  of  the  criminal  law.  Its  object  is  the  pro- 
tection of  the  community,  rather  than  the  compensation  of  the  indi- 
vidual. Where  a  person  is  guilty  of  theft,  or  robbery,  the  remedy  is 
the  imprisonment  of  the  criminal,  for  the  protection  of  society  against 
further  acts  of  this  kind.  The  criminal  remedy,  being  a  part  of  the 
criminal  law  is  outside  the  province  of  this  work. 

Civil. — The  civil  remedy  is  the  means  provided  for  enforcing  private 
rights  or  redressing  private  injuries,  such  as  the  breach  of  a  contract, 
trespass  on  private  property,  etc.  The  different  steps  in  the  remedy 
are  suit,  judgment,  and  execution. 

Suit. — Where  a  person  desires  redress  for  a  breach  of  contract  or 
other  injury,  the  first  thing  necessary  is  to  bring  a  suit,  or  action,  in  the 
proper  court,  against  the  person  responsible  for  the  injury.  The  suit 
is  brought  by  making  a  written  statement  to  the  court,  setting  forth  the 
terms  of  the  contract,  stating  that  it  has  been  broken,  and  asking  for 
redress.     The  suit  is  for  the  purpose  of  examining  the  evidence  to  see 

32 


REMEDIES.  33 

whether  the  contract  has  been  made  and  broken,  or  whether  other 
injury  has  been  done  as  claimed  by  the  party  bringing  the  suit. 

Judg-inent  is  the  decision  of  a  court  in  an  action.  If  the  facts  are 
found  from  the  evidence  to  be  as  claimed  by  the  party  bringing  the 
action  (called  the  plaintiff),  the  court  will  order  that  the  party  sued 
( called  the  defendant )  do  something  to  repair  the  injury,  usually  pay 
money  to  the  injured  party.  This  order  is  called  the  judgment.  A 
judgment  may  be  for  damages,  specific  performance,  or  an  injunction. 

Damages. — In  most  cases  where  a  contract  has  been  broken,  or  an 
injury  suffered,  the  court  will  order  a  money  compensation  to  be  paid, 
and  that  is  called  awarding  damages.  Every  one  ought  to  do  as  he 
agrees,  but  if  he  does  not,  the  law  will  not  generally  compel  him  to  do 
so,  but  will  simply  estimate  the  injury  to  the  other  party  in  money,  and 
order  that  he  be  paid  that  amount  by  the  party  causing  the  injury. 
The  general  rule  is  that  in  an  action  for  a  breach  of  contract,  the  party 
in  default  is  liable  to  the  other  party  for  such  injury  as  naturally  results 
from  the  breach,  or  which  may  fairly  be  supposed  to  have  been  within 
the  contemplation  of  the  parties  when  the  contract  was  made,  as  the 
probable  result  of  its  breach. 

In  Contracts  for  the  Payment  of  Money  the  damages  to  be 
awarded  in  case  of  a  breach  can  be  very  easily  determined,  since  the 
injury  sustained  is  simply  the  amount  agreed  to  be  paid,  with  legal 
interest  thereon  from  the  time  the  money  became  due.  The  use  of  the 
money  is  supposed  to  be  worth  what  the  law  of  the  state  has  fixed  as 
the  legal  rate  of  interest,  consequently  the  payment  of  the  full  amount 
agreed  to  be  paid  in  the  contract,  and  legal  interest  from  the  time  it 
became  due,  is  considered  to  be  full  compensation. 

In  Contracts  for  the  Sale  of  Goods. — When  the  seller  of  goods 
fails  to  deliver  them  according  to  the  contract,  the  purchaser  can  re- 
cover as  damages  whatever  the  market  value  of  the  same  kind  of  goods, 
at  the  time  agreed  upon  for  delivery,  exceeds  the  purchase  price  which 
had  been  agreed  upon,  with  interest  at  the  legal  rate  from  that  date. 
In  case  the  purchaser  has  paid  for  the  goods,  he  recovers  as  damages 
the  market  value  on  the  day  of  delivery,  with  interest. 

Where  the  buyer  refuses  to  accept  the  property,  the  seller  may  store 
it  for  him  and  sue  for  the  purchase  price;  he  may  resell  the  property 
in  such  manner  as  will  best  subserve  the  interests  of  the  first  buyer  by 
securing  the  highest  price,  and  recover  whatever  he  may  lack  of  obtain- 
ing the  purchase  price  agreed  upon;  or  he  may  keep  the  goods  and 
recover  from  the  buyer  whatever  the  market  price  on  the  day  fixed  for 
delivery  may  be  less  than  the  contract  price.  In  each  of  these  cases  the 
seller  recovers  interest  at  the  legal  rate  from  the  day  of  delivery. 
3 


34  CONTRACTS. 

In  Actions  for  Services. — In  case  un  employee  is  discharged  with- 
out his  own  fault  before  the  term  for  which  he  was  engaged  had  expired, 
he  may  recover  whatever  loss  he  sustains.  If  he  cannot  get  other  work 
he  may  recover  the  full  amount  of  wages  he  would  have  received  if  he 
had  not  been  discharged.  If  he  gets  other  work,  but  is  not  able  to  get 
as  good  wages  as  he  was  working  for  when  discharged,  he  can  recover 
the  difference  between  the  sum  he  earns  and  Avhat  he  would  have  earned 
had  he  continued  in  the  old  employment.  It  is  necessary,  however, 
that  he  use  diligence  in  looking  for  other  employment,  in  order  that  he 
be  entitled  to  damages. 

Liquidated  Damages. — In  some  contracts  the  parties  themselves  fix 
in  advance  tlie  damages  to  be  paid  in  case  the  contract  is  broken;  that  is, 
they  agree  upon  a  sum  of  money  which  one  party  failing  to  perform  liis 
part  of  the  agreement,  shall  pay  to  the  other,  and  it  is  inserted  in  the 
contract.  This  sum  is  called  liquidated  damages.  There  is  a  strong 
tendency  on  the  part  of  the  courts  to  disregard  such  agreements,  unless 
they  are  perfectly  fair  and  just  to  both  parties.  Where  an  attempt  is 
made  to  enforce  the  payment  of  liquidated  damages,  the  agreement 
will  be  enforced  by  the  court  only  where  the  damages  agreed  upon  are 
reasonable.  If  they  are  unreasonable,  the  agreement  will  be  disregarded 
and  reasonable  damages  awarded. 

Remote  Damages.  —  As  we  have  seen,  the  rule  is  that  any  one 
breaking  a  contract  is  liable  only  for  the  injury  that  naturally  results 
from  the  breach.  He  is  not  bound  to  pay  for  any  injury  that  may  be 
remotely  caused  by  his  failure.  A  debtor  fails  to  pay  the  money  he 
owes  at  the  agreed  time,  and  the  creditor  who  has  relied  upon  this  to 
meet  his  obligations  is  financially  embarrassed,  and  his  business  is 
ruined.  This  is,  in  a  certain  sense,  the  result  of  the  debtor's  breach  of 
his  contract,  because  if  he  had  performed  his  agreement  the  failure 
might  not  have  occurred,  yet  in  the  contemplation  of  the  law  it  is 
remote.  Many  other  causes  beside  this  help  to  cause  the  financial  loss 
to  the  creditor,  and  to  compel  one  person  to  pay  for  it  all  would  be 
unjust.  The  direct  injury  is  the  loss  of  the  money  and  its  use  for  a 
certain  time,  and  this,  as  we  have  seen,  must  be  paid  for,  but  more  than 
this  cannot  be  collected. 

Speculative  Damages.  —  In  order  to  be  collected,  damages  must 
not  only  be  direct  but  they  must  be  certain.  By  reason  of  the  failure 
of  one  party  to  fulfill  his  agreement,  the  other  may  be  deprived  of  some- 
thing of  value,  and  he  may  also  lose  profits  from  its  use  that  he  would 
otherwise  have  had.  The  amount  of  these  profits  is  uncertain,  specu- 
lative, and  cannot  be  recovered.  If,  however,  the  profits  can  be  ascer- 
tained with  any  degree  of  certainty,  they  can  be  recovered. 


REMEDIES.  35 

In  Actions  of  Tort.  —  We  have  so  far  spoken  only  of  damages 
recovered  for  a  breach  of  contract.  It  frequently  happens  that  injuries 
occur  without  any  breach  of  contract,  for  which  an  action  for  damages 
can  be  brought.  Such  cases  are  called  torts.  Examples  are  slander 
and  libel,  assault  and  battery,  trespass,  etc.  Any  wrong  or  injury  of 
this  kind  inflicted  by  one  person  upon  another,  must  be  paid  for  in 
damages.  The  extent  of  the  injury  not  being  usually  capable  of  exact 
computation,  the  amount  of  damages  is  largely  a  question  for  the  jury. 

Exemplary  Damages. — Where  the  injury  in  case  of  a  tort  is  in- 
flicted with  a  malicious  motive,  the  law  sometimes  allows  what  are  called 
exemplary,  or  vindictive  damages;  that  is,  the  damages  are  made  heavy 
for  the  purpose  of  punishing  the  offender  and  making  an  example  of 
him  to  deter  others.  Such  damages  are  never  allowed  for  a  breach  of 
contract,  but  only  for  a  willful  and  malicious  tort. 

Specific  Performance. — In  case  of  a  breach  of  contract,  the  judg- 
ment of  the  court  is  usually  for  a  money  compensation,  but  there  are 
some  cases  in  which  what  is  called  specific  performance  will  be  ordered; 
that  is,  the  party  who  has  broken  the  conti'act  will  be  ordered  to  fulfill 
it.  For  example,  where  a  person  has  contracted  to  sell  land,  and  then 
refuses  to  do  so,  the  court  will  sometimes  enforce  the  sale. 

Injunction  is  another  kind  of  judgment  that  is  frequently  rendered. 
Where  a  person  attempts  to  do  a  thing  which  he  has  agreed  not  to  do, 
or  which  he  has  no  right  to  do,  the  court  on  proper  application  will 
order  him  to  desist,  and  this  order  is  called  an  injunction. 

Execution. — If  the  party  against  whom  tiie  judgment  is  rendered 
does  not  comply  with  the  order,  it  is  necessary  that  compliance  be  en- 
forced, and  for  this  purpose  what  is  called  an  execution  is  issued;  that 
is,  the  proper  officer,  the  sheriff  or  constable,  is  ordered  to  enforce  com- 
pliance. If  the  judgment  is  for  the  payment  of  money,  the  officer 
seizes  and  sells  so  much  of  the  defendant's  property  as  may  be  necessary 
to  satisfy  the  claim.  If  for  specific  performance,  the  officer  will  be 
ordered  to  do  for  the  party  what  he  has  refused  to  do. 

QUESTIONS. 

Define  remedy.  What  kinds  arc  there  ?  Define  criminal  remedy. 
What  is  its  object  ?  Define  civil  remedy.  Give  the  different  steps. 
What  is  a  suit?  judgment?  What  are  the  parties  to  a  suit  called?  De- 
fine damages.  What  determines  the  amount  of  damages  that  will  be 
awarded  in  contracts  for  the  payment  of  money?  for  the  sale  of  goods? 
for  services  ?  What  are  liquidated  damages  ?  What  is  said  of  their 
collection?    Define  remote  damages.     What  is  said  of  their  collection? 


36  CONTEACTS. 

Give  examples.  Define  speculative  damages.  Give  example.  What 
is  said  of  their  collection  ?  Define  tort.  What  determines  the  damages 
in  such  cases?  What  are  exemplary  damages?  When  are  they  allowed 
and  why?  What  is  judgment  for  specific  performance?  when  granted? 
Define  injunction;  execution. 


CHAPTEE  YIII. 


DEFENSES. 


STATUTE   OF    FRAUDS. 


Definition. — It  frequently  happens  that  where  an  a<Jtion  has  been 
brought  against  a  person  because  of  the  yiolation  of  the  terms  of  an 
agreement,  the  person  sued  has  some  good  reason  why  he  ought  not  to 
be  compelled  to  pay  damages,  or  otherwise  conform  to  the  demands  of 
the  party  suing.  This  reason  is  called  a  defense.  His  defense  may  be 
that  he  never  made  the  contract;  or,  if  he  admits  the  contract,  it  may 
not  be  binding;  or  there  may  be  some  other  reason  why  he  ought  not  to 
be  compelled  to  carry  out  his  agreement  or  pay  damages  for  his  failure. 

The  Statute  of  Frauds  is  the  first  of  these  defenses  that  we  will 
consider.  An  old  English  law  was  called  "  The  Statute  of  Frauds  and 
Perjuries,"  because  its  object  was  to  prevent  fraud  and  perjury.  It 
required  many  contracts  to  be  in  writing,  because  of  the  difficulty  of 
remembering  them  correctly  when  made  orally,  and  provided  that  un- 
less they  were  in  writing  and  signed,  they  should  not  be  enforced.  This 
statute  has  been  partially  reenacted  in  the  different  states'  in  the 
Union,  and  is  referred  to  simply  as  the  Statute  of  Frauds. 

Requirements  of  the  Statute, — This  statute  as  reenacted  in  the 
different  states,  usually  requires  that  the  following  kinds  of  contracts 
must  be  in  writing,  and  signed  by  the  party  to  be  charged,  in  order  to 
be  binding:  (l)Promise8  to  answer  for  the  debt,  default  or  miscarriage 
of  another;  (2)  agreements  made  in  consideration  of  marriage,  except 
mutual  promises  to  marry;  (3)  leases  of  land  for  more  than  one  year; 
(4)  contracts  for  the  sale  of  lands  or  any  interest  in  lands;  (5)  agree- 
ments that  by  their  terms  are  not  to  be  performed  within  one  year  from 
the  making  of  them;  (6)  agreements  of  an  executor  or  administrator  to 
be  personally  responsible  for  the  debts  of  the  estate;  (7)  contracts  for 
the  sale  of  personal  property  involving  more  than  fifty  dollars,  unless 
some  part  of  the  property  be  delivered,  some  part  of  the  price  be  paid, 
or  the  sale  be  by  auction. 


'  In  Maryland  and  New  Mexico  there  is  no  Statute  of  Frauds. 

37 


38  CONTRACTS. 

Mcauing  of  tlie  Statute. — All  that  is  necessary  in  order  to  fill  the 
requirements  of  the  statute  that  the  above  contracts  be  in  writing,  is 
that  a  written  statement  containing  the  substance  of  the  agreement,  in 
terms  sufficiently  plain  to  be  understood,  be  signed  by  the  party  to  be 
charged;  it  need  not  be  signed  by  the  other  party.  It  of  course  applies 
only  to  executory  contracts.  After  a  contract  to  which  the  statute  ap- 
plies has  been  executed,  it  is  binding  whether  it  was  in  writing  or  not. 
The  statute  does  not  make  the  contract  void,  but  simply  says  that  no 
action  shall  be  maintained  to  enforce  performance.  If  it  has  already 
been  performed,  no  action  is  necessary  and  the  statute  has  no  effect. 
In  the  aj)plication  of  the  statute  there  is  a  distinction  between  the 
subject  matter  and  the  consideration.  If  the  subject  matter  has  been 
performed,  payment  of  the  consideration  can  be  enforced;  but,  although 
the  consideration  has  been  joaid,  no  performance  of  the  subject  matter 
can  be  enforced,  unless  there  is  a  refusal  to  return  the  consideration. 
Thus,  A  agrees  orally  to  lease  B  a  piece  of  land  for  two  years,  for  a  rent 
of  two  hundred  dollars.  This  contract  is  not  binding;  but  if  B  takes 
the  land  under  this  agreement  and  uses  it  for  two  years,  A  can  collect 
the  rent.  If,  however,  B  should  pay  the  rent  in  advance,  A  might 
return  it  and  refuse  to  rent  the  land. 

Answer  foi*  Default  of  Another. — A  promise  to  pay  the  debt  of 
another,  if  he  does  not  pay  it,  must  be  in  writing  in  order  to  bind  the 
promissor.  A  and  B  go  into  a  store  together,  and  A  tells  the  merchant 
to  let  B  have  goods  saying,  "If  B  does  not  j)ay  for  them  I  will."  This 
is  a  promise  on  the  part  of  A  to  answer  for  B's  debt,  if  he  does  not  pay 
it,  and  must  be  in  writing  in  order  to  be  binding.  If  A  had  said,  "  Let 
B  have  the  goods  and  I  will  pay  for  them,"  this  would  make  tlie 
debt  his  own  and  not  B's,  consequently  he  would  be  bound  by  his  oral 
promise.  The  promise,  in  order  to  be  within  the  meaning  of  the  stat- 
ute, must  be  made  to  the  creditor.  A  promise  made  orally,  on  sufficient 
consideration,  to  a  debtor  to  pay  his  debts  or  a  certain  part  of  them,  is 
binding.  So  also  the  promise  must  be  made  to  answer  for  the  debt  of 
another  provided  he  does  not  pay  it.  A  promise  to  be  responsible  for 
the  debt  of  another,  that  is,  to  take  the  debt  off  his  hands  and  release 
him  from  his  liability,  even  though  made  to  the  creditor,  is  binding 
without  being  Avritten.  This  is  not  an  agreement  to  answer  for  the 
default  of  another,  as  the  statute  requires. 

Consideration  of  Marriage, — Marriage  may  be  a  consideration  for 
any  other  promise,  and  the  statute  of  frauds  provides  that  any  agree- 
ment founded  upon  this  consideration  shall  be  in  writing.'     This  refers 

'  This  clause  of  the  statute  is  not  found  in  Pennsylvania,  North  Carolina  and 
Louisiana. 


DEFENSES — STATUTE   OF   FRAUDS.  39 

principally  to  what  are  known  as  marriage  settlements.  A  father 
promises  a  son  a  farm  if  he  will  marry;  a  man  agrees  to  deed  one-half 
of  his  property  to  a  woman  if  she  will  marry  him;  all  such  are  promises 
made  upon  consideration  of  marriage,  and  must  be  written  in  order  to 
be  binding.  Mutual  promises  to  marry  are  not  included  in  this  section 
of  the  statute. 

Sales  and  Licases  of  Land.  —  Contracts  for  the  sale  of  lands,  or 
any  interest  in  lands,  and  leases  of  lands  for  more  than  one  year  must 
be  written.  This  does  not  refer  to  deeds  conveying  land  ( which  are 
required  to  be  in  writing  for  an  other  reason  than  the  statute  of  frauds), 
but  to  agreements  to  make  a  deed  at  some  future  time. 

Agreements  not  to  Ibe  Performed  within  One  Year.  —  This  ap- 
plies, as  will  be  seen,  only  to  an  agreement  that  hy  its  terms  is  not  to  be 
performed  within  one  year  from  the  making  of  it.  That  is,  in  order  to 
bring  it  within  the  statute,  the  agreement  must  state  that  it  is  not  to 
be  performed  within  a  year,  or  this  fact  must  otherwise  aj^pear  from  its 
terms.  Thus,  if  A  enters  into  a  contract  with  B  agreeing  to  pay  him 
one  hundred  dollars  in  two  years,  it  must  be  in  writing  to  bind  him. 
So  if  A  should  agree  to  work  for  B  one  year,  beginning  in  two  mouths, 
it  must  be  in  writing,  because  we  can  see  from  the  terms  of  the  agree- 
ment that  it  is  not  to  be  performed  within  one  year.  If  the  contract  is 
to  build  a  house,  or  do  any  other  piece  of  work  that  may  occujiy  more 
than  a  year,  but  may  be  completed  in  less,  it  need  not  be  wi'itten,  even 
though  both  parties  expect  it  to  occupy  more  than  a  year.  Any  con- 
tract that  can  possibly  be  performed  within  a  year  does  not  come  within 
the  provisions  of  this  statute,  unless  it  is  expressly  agreed  that  it  is  not 
to  be  so  performed. 

Sales  of  Personal  Property.  —  The  provisions  of  the  Statute  of 
Frauds  regarding  personal  property,  as  reenacted  in  most  of  the  states, 
usually  require  that  a  sale  of  personal  property,  of  the  value  of  more 
than  fifty  dollars,  in  order  to  be  binding,  must  be  evidenced  by  a  writ- 
ing, unless  some  part  of  the  goods  is  accepted,  or  some  j)art  of  the  jirice 
paid  at  the  time  of  the  sale,  or  the  sale  be  by  auction.  It  has  been 
modified  in  some  of  the  states  by  changing  the  amount,  and  in  a  few 
it  has  not  been  reenacted. ' 

Other  Provisions. — In  all  the  states  the  statute  has  several  pro- 
visions other  than  those  mentioned  above,  but  these  are  the  most  im- 


*  It  is  $30  in  Maine,  New  Jersey,  Missouri  and  Arl<ansas;  $33  in  New  Hamp- 
shire; $40  in  Vermont;  $200  in  California  and  Idatio;  $300  in  Montana  and  Utah; 
in  Florida  and  Iowa  a  sale  of  personal  property  of  any  amount  musL  comply  with 
one  of  these  conditions. 


4:0  CONTRACTS. 

portant  ones,  and  are  the  only  ones  that  have  a  direct  connection  with 
the  laws  of  business. 

As  a  Defense. — The  Statute  of  Frauds  requires  that  certain  con- 
tracts, in  order  to  be  binding,  must  be  in  writing,  hence  a  contract  that 
does  not  comply  with  these  conditions  cannot  be  enforced.  Therefore, 
when  a  suit  is  brought  on  such  a  contract,  the  defendant  needs  only  to 
set  up  the  statute  as  a  defense,  and  the  court  will  relieve  him  from  all 
liability. 

QUESTIONS. 

Define  defense.  In  what  may  it  consist?  What  is  the  Statute  of 
Frauds?  Name  its  requirements.  What  is  the  meaning  of  the  statute? 
To  what  kinds  of  contracts  does  it  apply  ?  Why  not  to  executory  ? 
What  distinction  is  made  between  consideration  and  subject  matter  ? 
What  is  meant  by  ''answering  for  the  default  of  another?"  Give 
example.  Give  the  application  of  the  statute  to  this  kind  of  a  promise. 
What  is  a  promise  in  consideration  of  marriage?  Give  example.  Give 
the  application  of  the  statute.  How  does  the  statute  apply  to  sales  and 
leases  of  lands?  What  does  the  statute  mean  by  agreements  not  to  be 
performed  within  one  year?  Give  example.  What  application  has  the 
statute  to  sales  of  j^ersonal  property?  Under  what  circumstances  may 
the  statute  be  set  up  as  a  defense  ? 


CHAPTEE  IX. 


DEFENSES. 


STATUTE   OF    LIMITATIONS. 


Definition. — The  natural  course  of  events  is  for  him  who  owes  a 
debt  to  pay  it,  and  for  him  to  whom  a  debt  is  due  to  demand  it.  It  is 
very  rare  for  a  person  to  allow  a  claim,  which  is  enforceable  at  law,  to 
lie  for  a  long  period  unpaid.  Also,  as  a  claim  gets  very  old  it  becomes 
more  difficult  to  get  at  the  evidence  to  support  it,  and  to  defend  against 
it;  consequently  a  claim  ought  not  to  be  allowed  to  remain  for  a  long 
time  unsettled.  On  these  two  grounds,  laws  have  been  passed  in  nearly 
all  the  states  providing  that,  after  the  expiration  of  a  certain  period,  no 
action  shall  be  maintained  to  enforce  a  claim.  These  laws  are  called 
Statutes  of  Limitation,  because  they  limit  the  time  in  which  suit  can  be 
brought  upon  a  debt. 

Provisions. — This  statute  limits  the  time  during  which  suit  can  be 
brought  on  a  large  number  of  claims,  and  the  time  varies  from  one  to 
twenty,  and  even  more  years,  according  to  the  state  in  which  it  is 
found,  and  the  kind  of  claim.  Generally  the  time  is  longer  for  actions 
concernmg  real  estate  and  contracts  under  seal  than  for  simple  contracts. 
In  actions  for  the  recovery  of  real  estate  and  on  sealed  instruments,  the 
period  varies  from  five  to  twenty-one  years.  In  the  majority  of  the 
states,  however,  the  period  is  above  ten  years,  generally  fifteen  or 
twenty.  On  simple  written  contracts  the  period  varies  from  three  to 
twenty  years,  but  in  most  of  the  states  it  is  five  or  six  years.'  On  oral 
contracts,  open  and  book  accounts,  etc.,  it  is  usually  from  two  to  six 
years,  but  in  one  or  two  states  as  high  as  ten." 

Beginning  of  the  Period. — The  period  of  limitation  begins  when- 


'  As  long  time  as  twenty  years  is  given  in  a  few  states  on  promissory  notes  signed 
in  the  presence  of  witnesses.  Indiana  allows  twenty  years  on  written  contracts  not 
for  the  payment  of  money. 

^The  student  should  refer  to  the  statutes  of  his  own  state  for  the  kinds  of  actions 
limited,  and  the  period  of  limitation  on  each.  The  limitations  in  the  different 
states  are  so  many  and  so  varied  that  it  is  impossible  to  give  them  here. 

41 


42  CONTRACTS. 

ever  the  debt  is  due,  or  whenever  an  action  for  its  recovery  might  have 
been  commenced.  In  the  case  of  a  note  it  begins  on  the  expiration  of 
the  Last  day  of  grace.  On  a  sight  draft,  when  the  draft  is  presented 
for  payment.  In  a  claim  for  services,  when  the  work  on  which  the 
chiim  is  based  is  completed,  unless  the  time  of  payment  is  extended  by 
agreement.  On  a  running  account  it  begins  from  the  date  of  the  last 
item  on  either  side.' 

Disability  of  the  Creditor. — There  are  some  circumstances,  how- 
ever, which  will  prevent  the  period  from  beginning  when  the  debt 
becomes  due.  A  person  who  is  not  competent  to  make  a  contract  is  not 
generally  competent  to  bring  a  suit  against  another.  If  the  creditor 
is  under  a  disability  so  that  he  cannot  bring  an  action  when  the  debt 
becomes  due,  that  is,  if  he  is  an  infant,  or  is  insane,  etc.,  or  if  he  is 
absent  from  the  state,  the  beginning  of  the  period  is  suspended.  In 
some  states  it  is  provided  that  he  shall  have  the  full  period  after  the 
disability  is  removed,  or  after  he  returns  to  the  state  where  the  action 
must  be  brought.*  In  the  others  different  periods  are  allowed  after  the 
removal  of  the  disability,  varying  from  one  to  five  years.'  In  many  of 
the  states  where  a  particular  period  is  prescribed,  a  longer  period  after 
its  removal  is  allowed  on  actions  connected  with  real  property  than  on 
others.  The  disability  must  exist,  however,  when  the  debt  becomes 
due,  or  the  period  will  begin  to  run,  and  then  it  is  not  stopped  even  if 
a  disability  occur. 

Absence  of  Debtor. — Where  a  debtor  is  absent  from  the  state  when 
the  cause  of  action  arises,  the  period  of  limitation  does  not  begin  until 
his  return.  According  to  the  old  rule,  if  the  debtor  is  in  the  state 
when  the  debt  becomes  due,  or  comes  in  afterwards  and  then  leaves,  the 
period  will  commence  and  continue  running  whether  his  presence  was 
known  to  the  creditor  or  not.  This,  however,  has  been  modified  in 
this  country.  In  some  states  it  has  been  enacted  that  the  time  during 
which  the  debtor  is  absent  shall  not  be  counted;  successive  absences  are 


'  This  provision  is  made  by  statute  in  some  of  the  states,  but  in  the  absence  of 
such  a  provision  it  is  by  no  means  settled  that  this  is  always  the  law. 

''This  is  true  in  the  following  states:  Arkansas,  California,  Colorado,  Kentucky, 
Louisiana,  Maine,  Maryland,  Massachusetts,  Michigan,  Mississippi,  Missouri,  Ne- 
braska, Nevada,  New  Jersey,  New  York,  North  Carolina,  Ohio,  Pennsylvania, 
Rhode  Island,  Texas,  Vermont,  Virginia,  Washington,  Wyoming. 

2 It  is  one  year  in  the  following  states:  North  and  South  Dakota,  Kansas,  Min- 
nesota, New  Mexico,  Oregon,  South  Carolina,  Iowa.  In  Illinois,  Indiana,  and  New 
Hampshire  two  years  are  allowed.  Three  years  are  allowed  in  Alabama,  Delaware, 
and  Tennessee.    In  Wisconsin  five  years  are  allowed. 


DEFENSES — STATUTE   OF   LIMITATIONS.  43 

thus  taken  out  and  the  period  extended  that  mucli.'  Even  where  such 
a  law  has  not  been  passed,  the  courts  in  this  country  have  generally  held 
that  the  presence  of  the  debtor  in  the  state  must  be  sufficiently  open 
and  for  a  sufficient  time  that  the  creditor,  by  the  exercise  of  reasonable 
diligence,  can  discover  his  presence  and  bring  his  action. 

New  Promise. — As  we  have  seen,  the  statute  of  limitations  is  based 
on  two  grounds.  The  first  of  these,  the  one  on  which  it  was  first  con- 
sidered to  rest,  is  the  presumption,  from  the  lapse  of  time,  that  the 
debt  has  been  paid.  When  this  was  the  only  ground,  it  might  be  over- 
thrown by  positive  proof  that  it  had  not  been  paid,  like  an  acknowledge- 
ment of  the  debtor  himself  of  his  liability.  In  this  country,  however, 
the  ground  for  the  statute  has  been  considered  to  be  the  desirability 
of  preventing  the  revival  of  old  and  stale  claims,  consequently  a  mere 
acknowledgment  of  the  debt  is  not  sufficient  to  take  it  out  of  the  opera- 
tion of  the  statute.  The  debtor,  however,  has  a  right  to  waive  the 
benefit  of  the  statute,  consequently  if  he  makes  a  promise  to  pay  the 
claim  after  it  is  barred,  this  will  revive  it,  and  it  will  then  continue 
binding  again  during  the  whole  period.  It  is  sometimes  difficult  to  tell 
whether  there  has  been  a  new  promise,  or  a  mere  acknowledgment, 
consequently  it  has  been  enacted  in  most  of  the  states  that  such  new 
promise  must  be  in  writing  in  order  to  be  binding.'' 

Part  Payment. — A  voluntary  payment  by  the  debtor  of  part  of  an 
outlawed  claim,  is  considered  conclusive  proof  of  an  acknowledgment 
on  his  part  of  his  liability  and  of  an  intention  to  pay,  consequently  this 
has  the  effect  of  reviving  his  liability  as  to  the  balance.  In  such  a  case 
it  is  only  necessary  to  show  that  the  payment  was  intended,  by  the  party 
paying,  as  a  part  payment  on  the  outlawed  debt.  If  the  payment  was 
made  with  the  understanding  that  it  should  be  full  settlement,  of  course 
no  promise  to  pay  the  balance  can  be  implied.  The  part  payment  can 
be  made  in  property  as  well  as  money,  and  will  equally  operate  as  a 
revivor,  if  the  intention  can  be  shown.  So  if  the  debtor  gives  his  prom- 
issory note  as  part  payment  it  will  revive  the  whole. 


'  Such  a  law  has  been  passed  by  the  following  states:  Alabama,  North  Dakota, 
South  Dakota,  Delaware,  Illinois,  Indiana,  Iowa,  Kansas,  Maine,  Michigan,  Minne- 
sota, Missouri,  Montana,  Nevada,  Ohio,  Rhode  Island,  Tennessee,  Utah,  Vermont, 
West  Virginia,  Wyoming.  It  is  true  also  in  North  and  South  Carolina,  if  the  ab- 
sence is  more  than  one  year. 

^  This  is  true  in  the  following  states:  Alabama,  Arkansas,  California,  North  and 
South  Dakota,  Florida,  Georgia,  Illinois,  Indiana,  Iowa,  Kansas,  Maine,  Massachu- 
setts, Minnesota,  Mississippi,  Missouri,  Montana,  Nevada,  Nebraska,  New  Mexico, 
New  York,  North  Carolina,  Ohio,  Oregon,  Utah,  Vermont,  Virginia,  Washington, 
West  Virginia,  Wisconsin,  Wyoming. 


44  CONTRACTS. 

Aflfecting  Collateral  Security. — It  is  important  to  remember  that 
the  statute  of  limitations  does  not  cancel  the  debt,  but  simply  pro- 
vides that  "no  action  shall  be  maintained  upon  it"  after  a  given  time. 
Therefore,  if  the  debt  which  has  been  barred  by  the  statute  is  secured 
by  a  mortgage  which  is  not  affected  by  the  statute,  this  can  be  foreclosed 
and  the  property  which  it  covers  sold  to  pay  the  debt  even  when  tiie 
debt  itself  cannot  be  sued.'  If  the  property  on  which  the  mortgage  is 
given  is  not  sufficient  to  pay  the  claim,  of  course  nothing  further  can 
be  obtained. 

Law  of  Place. — Another  consequence  of  the  fact  that  the  statute 
does  not  cancel  the  debt  but  merely  destroys  the  remedy,  is  found  in 
the  fact  that,  no  matter  where  the  contract  was  made,  the  law  of  the 
place  where  it  is  sought  to  be  enforced  determines  whether  it  is  barred 
or  not.  The  general  rule  where  there  is  no  statute  to  the  contrary  is, 
that  although  a  contract  is  outlawed  where  it  was  made,  if  the  parties 
move  to  another  state  with  a  period  of  limitation  long  enough  so  that 
it  has  not  expired,  the  contract  can  be  enforced.  Several  of  the  states 
have  provided  by  statute,  however,  that  no  claim  shall  be  enforced  there 
that  is  barred  by  the  statutes  of  the  states  where  it  is  made.'^ 

As  a  Defense. — Where  the  period  of  limitation  fixed  by  the  state 
for  a  particular  contract  has  expired,  and  suit  is  brought  to  enforce  it, 
as  in  the  case  of  the  statute  of  frauds,  all  that  is  necessary  for  the  de- 
fendant to  do,  is  to  set  up  that  fact  as  a  defense  and  he  will  be  relieved 
from  all  liability. 


'  In  Mississippi  it  is  provided  by  statute  that  if  the  note  is  barred  by  the  statute 
the  same  is  true  of  the  mortgage  given  as  security. 

2  Such  provision  is  made  by  statute  in  the  following  states:  Idaho,  Iowa,  Kan- 
sas, Montana,  Nebraska,  Ohio,  Tennessee,  Washington,  West  Virginia,  Wyoming. 

QUESTIONS. 

What  is  the  statute  of  limitations?  What  is  its  object?  What  are 
its  provisions?  When  does  the  period  of  limitation  begin?  Are  there 
any  exceptions  to  this?  What  will  suspend  the  beginning  of  the  period  ? 
What  is  the  law  now  with  reference  to  the  absence  of  the  debtor  ? 
What  is  the  effect  of  a  new  promise  after  the  debt  is  barred?  What 
provisions  have  the  different  states  made  regarding  a  new  promise  ? 
Why?  What  is  the  effect  of  payiug  part  of  an  outlawed  debt?  What 
must  be  shown  in  order  to  have  that  effect?  What  effect  has  the  statute 
on  collateral  security  ?  What  is  said  of  the  law  of  place  as  applied 
to  the  operation  of  the  statute?  When  may  a  statute  be  set  up  as  a 
defense  ? 


CHAPTER  X. 


DEFENSES. 


PERFORMANCE,  ETC. 


How  this  Differs  from  Foregoing-. — The  defenses  treated  of  in  the 

two  preceding  chapters  have  referred  to  the  validity  of  the  contract.  In 
setting  np  one  of  these  defenses  the  defendant  simply  answers  that  he 
ought  not  to  perform  his  part  of  the  agreement  because  the  contract  is 
not  binding.     In  this  chapter  we  treat  of  the  defenses  set  up  where  the 

'  defendant  has  already  done  what  he  agreed  to,  of  lias  shown  himself 
ready  to  do  so^or  is  released  from  his  obligation  by  some  act  of  the 
plaintiff. 

Performance. — Where  the  contract  was  for  the  performance  of  some 
specific  act,  and  the  party  is  sued  because  of  his  failure,  he  may  claim 
that  he  has  performed  his  part  of  the  agreement,  and  in  that  case  he 
sets  up  the  defense  of  performance;  that  is,  he  says  he  ought  not  to  be 
compelled  to  pay  damages  because  he  has  already  done  what  he  agreed 
to  do. 

Manner. — In  order  to  constitute  a  good  defense,  the  performance 
must  conform  to  the  terms  of  the  contract  as  to  time,  place,  and  any 
other  condition  agreed  upon,  and  the  requirements  of  the  law.  The 
rule  formerly  was  that  the  party  should  be  held  strictly  to  the  terms  of 
his  contract,  and  if  there  was  the  slightest  variation  it  would  not  be  a 
performance.  This  rule  has  been  somewhat  relaxed,  so  if  there  has 
been  a  substantial  performance  it  will  be  good,  allowance  of  damages, 
of  course,  being  made  for  whatever  trivial  omissions  or  defects  there 
may  be. 

Time  is  sometimes  an  important  element  in  the  performance  of  a 
contract.  When  a  time  was  definitely  fixed  in  the  agreement  for  the 
performance,  the  party  setting  up  this  defense  must  show  that  this  con- 
dition has  been  complied  with,  or  that  it  was  not  important.  If  he  can 
show  that  he  has  performed  his  agreement  at  another  time  than  the  one 
specified,  but  that  the  time  is  unimportant,  that  is,  that  the  other  party 

•   has  suffered  no  injury  by  reason  of  the  change,  it  will  be  a  good  defense. 

46 


46  CONTRACTS. 

Where  a  person  agrees  to  perform  anything  a  certain  number  of  days 
from  date,  the  day  on  which  the  contract  was  made  is  not  counted,  and 
he  has  all  of  the  last  day  specified  in  which  to  perform.  If  the  time 
specified  for  performance  falls  on  Sunday,  he  has  all  of  the  day  follow- 
ing to  perform,  with  the  exception  that  will  be  mentioned  hereafter  in 
the  case  of  negotiable  paper. 

Impossibility. — If  by  some  unforseen  nnidrance,  arising  after  the 
contract  was  made,  it  becomes  impossible  for  one  party  to  perform  his 
part  of  the  agreement,  he  will  be  excusedfrom  so  doing,  and  will  not  be 
compelled  to  pay  damages  for  his  failure.  It  must  be  an  actual  physical 
impossibility,  not  a  mere  hardship  or  inconvenience,  in  order  to  furnish 
an  excuse,  and  must  be  other  than  that  arising  from  lack  of  pecuniary 
means.  Although  precise  and  literal  performance  is  impossible,  if  a 
substantial  performance  is  possible  the  impossibility  Avill  be  no  excuse. 
If  the  impossibility  might  have  been  foreseen  or  prevented  by  ordinary 
prudence,  the  promisor  will  not  be  released  from  his  liability,  nor  will 
he  be  if  he  is  himself  responsible  for  the  impossibility. 

Payment. — Where  the  contract  is  for  the  payment  of  money,  the 
defense  corresponding  to  performance  in  other  contracts  is  payment 
In  order  to  make  good  this  defense,  the  party  setting  it  up  must  show 
that  the  money  was  delivered  to  the  party  making  the  claim,  or  his 
authorized  agent,  and  in  accordance  with  the  terms  of  the  agreement. 

Legal  Tender. —  Unless  the  creditor  accepts  something  else,  the 
payment  must  be  made  in  money  Avhich  has  the  quality  of  being  legal 
tender;  that  is,  money  which  Congress  has  declared  must  be  accepted 
if  offered  in  payment  of  debts.  The  kinds  of  money  now  possessing 
this  quality  are  gold,  silver,  copper  and  nickel  coins,  greenbacks,  and 
some  of  the  later  issues  of  silver  certificates.  All  gold  coins  and  the 
silver  dollar  are  legal  tender  for  any  amount.  Silver  coins  below  one 
dollar  are  legal  tender  in  amounts  not  exceeding  ten  dollars.  Copper 
and  nickel  coins  are  legal  tender  for  only  twenty-five  cents.  Greenbacks, 
or  United  States  notes,  are  legal  tender  for  any  amount,  and  for  all  debts 
except  duties  on  imports  and  interest  on  government  bonds. 

It  will  be  noticed  that  the  currency  having  legal  tender  qualities  does 
not  include  National  Bank  Notes  nor  any  gold  or  silver  certificates 
issued  prior  to  1890,  which  constitute  a  large  part  of  the  money  of  the 
country.  As  a  matter  of  fact  debts  are  paid  every  day  in  money  which 
is  not  legal  tender,  and  is  accepted  without  question  because  it  is  as 
good  as  gold,  and  when  so  accepted  constitutes  a  good  payment.  The 
money,  however,  must  be  what  it  purports  to  be  in  order  to  make  a  good 
payment.     If  it  should  turn  out  to  be  counterfeit,  it  is  no  payment 


1 


DEFENSES  —  PEKFORMAXCE,    ETC.  47 

although  accepted  as  such,  but  the  counterfeit  niuuey  must  be  returned 
within  a  reasoiiable  time. 

Payment  by  Note. — A  contract  for  the  payment  of  money  is  fre- 
quently performed  by  giving  a  note  in  settlement.  The  effect  of  this 
is  simply  to  postpone  the  real  payment  until  the  time  specified  in  the 
note.  If  A  agrees  to  pay  B  a  certain  sum  on  a  specified  day,  and  when 
that  day  arrives  B  accepts  A's  note  due  in  sixty  days,  this  merely  ex- 
tends the  original  contract  sixty  days,  and  when  that  time  expires  B  can 
sue  on  the  original  debt. 

Place  of  Payment. — Where  a  place  is  specified  in  the  agreement  at 
which  payment  is  to  be  made,  the  defendant,  in  order  to  make  good 
the  defense  of  payment,  must  show  that  this  condition  has  been  com- 
plied with.  Where  a  note  is  made  payable  at  a  bank  on  a  certain  day, 
the  money  must  be  there  before  the  close  of  banking  hours  on  that  day. 
If  the  creditor  directs  the  money  to  be  sent  to  him  in  a  certain  way,  the 
money  so  sent  will  constitute  payment  whether  it  reaches  its  destination 
or  not. 

Presumption  of  Payment. — There  are  certain  circumstances  which 
afford  evidence  of  payment  so  strong  that  they  are  said  to  raise  a  pre- 
sumption of  payment.  That  is,  in  the  absence  of  direct  and  positive 
evidence  to  the  contrary,  the  court  in  which  the  action  is  brought  will 
presume  the  debt  to  have  been  paid.  Ordinarily  where  a  person  gives 
his  note,  he  does  not  again  get  possession  of  it  until  he  pays  it;  conse- 
quently where  a  person  has  in  his  possession  a  note  made  by  himself,  he 
is  presumed  to  have  paid  it,  unless  there  is  positive  evidence  to  show 
the  contrary.  The  possession  of  a  receipt  also  raises  such  a  presump- 
tion, because  ordinarily  men  do  not  give  receipts  without  receiving 
money.  These  circumstances  are  only  presumptive  evidence,  however, 
and  may  be  overcome  by  stronger  evidence  to  the  contrary. 

Tender. — This  defense  is  very  closely  allied  to  tlie  defenses  of  per- 
formance and  payment.  It  is  an  offer  of  something  in  satisfaction  of 
an  obligation.  Where  a  person  has  entered  into  a  contract,  all  that  can 
be  asked  of  him  is  that  he  carry  out  strictly  the  terms  of  the  agreement, 
and  since  it  is  the  policy  of  the  law  to  discourage  litigation,  an  expressed 
willingness  to  perform  is  a  good  defense  to  an  action  for  damages  for 
non-performance. 

Object. — A  tender  is  an  admission  that  the  amount  offered  is  due, 
and  the  object  of  making  it  where  it  will  not  be  accepted  is  not  to  be 
released  from  paying  the  claim,  but  to  escape  the  payment  of  damages 
and  costs.  Where  the  obligation  is  for  the  payment  of  money,  there  is 
no  occasion  for  refusnig  to  accept  the  amount  tendered  unless  there  is  a 
dispute  between  the  parties  as  to  the  amount  due.     Where  the  offer  is 


48  CONTRACTS. 

refused  on  the  ground  that  it  is  not  enough,  suit  can  be  brought.  If 
more  is  recovered  than  was  offered,  the  costs  of  the  suit  will  have  to  be 
paid  by  the  defendant,  but  if  the  judgment  is  for  the  same  amount  or 
less  than  the  tender,  the  costs  must  be  paid  by  the  plaintiff.  Thus,  if 
A  is  indebted  to  B  in  an  amount  which  he  claims  is  twenty  dollars,  but 
which  B  claims  is  thirty,  A  can  make  a  tender  to  B  of  the  twenty  dol- 
lars which  he  acknowledges  he  owes,  and  B  must  either  accept  that  or 
nothing.  If  he  refuses  on  the  ground  that  it  is  not  enough,  nothing 
remains  for  him  to  do  but  to  sue  A,  and  unless  judgment  is  rendered  in 
his  favor  for  more  than  the  twenty  dollars  offered  by  A,  the  costs  of  the 
suit  must  be  paid  by  B. 

It  sometimes  happens  that  one  party  refuses  to  perform  his  part  of  a 
contract  which  is  entirely  executory.  In  such  cases  the  other  party 
must  make  a  tender  of  whatever  is  required  of  him;  that  is,  he  must 
offer  to  perform  his  part  of  the  agreement  before  he  can  enforce  per- 
formance from  the  other.  For  example,  if  A  agrees  to  buy  of  B  certain 
goods,  and  then  without  just  cause,  decides  that  he  will  not  accept 
them,  B  must  make  a  tender  of  the  goods  before  he  can  recover  the 
purchase  price. 

Requirements. — In  order  to  make  a  legal  tender,  the  exact  amount 
of  money  owed  must  be  produced  and  offered,  unless,  before  the  money 
is  produced  and  counted  out,  the  party  to  whom  it  is  to  be  offered  posi- 
tively refuses  to  accept  it.  The  tender  must  have  no  condition  annexed 
to  it  that  the  creditor  can  have  any  good  reason  for  objecting  to.  For 
instance,  if  the  offer  is  accompanied  by  a  demand  for  a  receipt  in  fall, 
it  will  not  be  a  good  tender.  An  offer  is  a  good  tender  only  when  made 
in  money  that  has  the  quality  of  legal  tender.  If,  however,  the  creditor 
does  not  object  on  the  ground  of  the  kind  of  money,  he  will  be  deemed 
to  have  waived  this  requirement.  Unless  the  contract  provides  for  the 
place  of  payment,  the  debtor  must  seek  the  creditor  if  he  is  in  the  state 
and  make  the  tender  to  him.  If  the  money  due  is  for  rent,  and  no 
place  is  named  in  the  lease  where  it  is  to  be  paid,  it  is,  due  on  the  premi- 
ses, and  the  tender  of  the  amount  there  is  sufficient. 
f  Accord  and  Satisfaction. — Grenerally  defined,  accord  and  satisfac- 
^  tion  is  another  agreement  between  the  parties,  made  and  executed  in 
satisfaction  of  the  former  one.  Where  there  is  a  controversy  as  to  the 
amount  of  a  debt,  and  a  compromise  is  reached  by  which  both  parties 
are  satisfied,  and  the  claim  is  settled,  this  constitutes  accord  and  satis- 
faction. Payment  of  a  less  sum  than  the  debt,  where  there  is  no  dispute 
as  to  the  amount,  is  not  satisfaction  for  the  remainder,  even  though  it 
is  accepted  as  such,  and  the  party  thus  accepting  part  payment  as  full 
settlement  can  afterwards  collect  the  remainder. 


DEFENSES  —  PERFOEMANCE,    ETC.  49 

The  reason  for  this  is  that  there  has  been  no  consideration  for  the 
release  of  part  of  the  debt,  consequently  such  release  is  not  binding. 
If,  however,  a  part  be  paid,  or  additional  security  be  given  for  a  part 
before  it  is  due,  on  consideration  of  the  release  of  the  balance,  this 
payment,  or  giving  additional  security  before  due,  will  be  a  sufficient 
consideration  for  the  partial  release,  and  the  settlement  will  constitute 
accord  and  satisfaction.  Where  something  else  is  given  instead  of  what 
is  claimed,  and  is  accepted  as  payment,  this  will  constitute  accord  and 
satisfaction,  without  regard  to  the  actual  value  of  the  property  accepted. 
Of  course,  if  a  defendant  in  an  action  for  breach  of  contract,  can  show 
that  an  accord  and  satisfaction  for  the  claim  has  been  entered  into  and 
executed,  this  will  constitute  a  good  defense  to  the  suit. 
^  Arbitration  and  Award. — This  defense  is  somewhat  similar  to  the 
preceding  one.  In  accord  and  satisfaction,  the  parties  themselves  have 
decided  what  shall  be  done  by  one  to  satisfy  the  claims  of  the  other;  in 
arbitration  and  award,  they  agree  to  submit  this  question  to  third  par- 
ties, called  arbitrators.  Where  a  claim  is  submitted  by  the  parties  to 
arbitrators  to  decide,  and  is  decided  by  them,  their  decision  is  binding 
if  properly  given;  that  is,  if  given  in  accordance  with  the  terms  of 
the  contract  by  which  the  claim  was  submitted  to  them,  and  their 
decision  would  be  a  defense  to  a  suit  in  which  something  else  was  de- 
manded on  this  claim.  Where  a  disputed  claim  has  been  submitted  to 
arbitrators,  either  party  can  revoke  the  submission  at  any  time  before 
the  award  is  made,  and  wliere  a  person  has  agreed  to  submit  a  claim 
to  arbitrators,  he  is  not  obliged  to  carry  out  this  agreement  unless  he 
wishes. 

Alteration. — The  changing  of  a  written  instrument  by  erasure,  inter- 
lineation, etc.,  by  one  party  without  the  consent  of  the  other,  renders 
it  void,  and  if  this  can  be  proved,  it  is  a  good  defense  to  an  action  for 
a  breach  of  the  contract.  It  was  formerly  the  rule,  that  any  alteration 
of  whatever  nature,  made  in  this  way,  made  the  agreement  void,  but 
the  rule  has  been  so  changed,  that  an  alteration  to  have  this  effect, 
must  be  material;  that  is,  it  must  change  the  meaning  and  effect  of  the 
agreement. 

Pendency  of  Another  Suit. —  It  is  not  the  policy  of  the  law  to 
encourage  litigation,  hence  it  will  not  permit  anyone  to  bring  more 
than  one  suit  at  the  same  time  against  the  same  person,  and  for  the 
same  cause  of  action.  Therefore,  it  is  a  good  defense  to  a  suit  that 
another  is  then  pending  between  the  same  parties,  and  for  the  same 
cause.  The  requirements  that  the  two  actions  must  be  for  the  same 
cause,  is  strictly  enforced,  and  it  is  not  enough  that  the  same  property 
be  in  controversy  in  both  actions.     It  has  been  held  that  the  pendency 


50  CONTRACTS. 

of  an  action  for  rent,  alleged  to  be  payable  quarterly,  is  no  defense  to 
an  action  for  the  same  rent  under  a  claim  that  it  is  payable  at  the  end 
of  the  year.  The  question  to  be  determined  in  setting  up  this  defense, 
is  whether  the  same  evidence  will  be  required  to  support  both  actions; 
if  so,  then  the  pendency  of  one  is  a  defense  to  the  other;  if  not,  it  is  no 
defense.  In  order  that  this  defense  be  good,  it  must  also  be  shown  that 
the  suit  which  is  set  up  as  a  defense  was  pending  when  the  other  was 
begun. 

Set-oflf. — This  is  a  mode  of  defense  by  which  the  defendant  acknowl- 
edges the  justice  of  the  plaintiff's  claim,  but  sets  up  a  demand  of  his 
own  to  counterbalance  it  in  whole  or  in  part.  A  owes  B  one  hundred 
dollars,  but  claims  that  B  is  also  indebted  to  him  in  the  same  amount. 
If  B  sues  to  collect  his  claim,  A  can  set-off  his  claim  against  B,  and  if 
he  can  substantiate  it,  it  will  be  a  good  defense  to  the  action. 

.     QUESTIONS. 

In  what  respect  do  the  defenses  treated  in  this  chapter  differ  from 
the  preceding  ones  ?  What  is  the  defense  of  performance  ?  In  order 
to  make  a  good  defense,  what  must  be  shown  with  reference  to  the 
manner  of  performance?  time?  What  is  the  effect  of  impossibility 
of  performance?  What  is  the  defense  of  payment?  In  what  kinds  of 
money  must  it  be  paid?  What  kinds  of  money  are  legal  tender?  What 
is  the  effect  of  making  payment  by  note  ?  Where  must  payment  be 
made  ?  What  circumstances  will  raise  a  presumption  of  payment  ? 
What  is  the  defense  of  tender?  Give  its  object;  requirements.  Define 
accord  and  satisfaction;  what  constitutes?  How  does  it  operate  as  a 
defense?  What  is  arbitration  and  award?  Give  its  effect.  What  is  the 
effect  of  altering  a  written  agreement  without  the  consent  of  both  par- 
ties ?  What  constitutes  a  material  alteration  ?  What  effect  has  the 
pendency  of  another  suit  on  the  one  last  commenced?  What  must  be 
shown  in  order  that  it  have  this  effect?  What  is  set-off  ?  What  is 
said  of  it  as  a  defense? 


CHAPTEE  XI. 


NEGOTIABLE    PAPER. 


GENERAL  PRINCIPLES. 


Definition  and  Use. —  By  negotiable  paper  is  meant  written  evi- 
dences of  debt  which  may  be  transferred  by  indorsement  or  delivery, 
giving  the  holder  the  full  right  to  sue  and  collect  it.  A  large  part  of 
the  business  of  the  country  is  done  on  credit,  the  money  to  be  paid  at 
some  future  time,  and  this  being  the  case,  it  is  necessary  to  have  some 
evidence  of  debt  that  can  be  transferred,  and  thus  perform  the  function 
of  money.  To  meet  this  demand  we  have  the  different  kinds  of  nego- 
tiable instruments,  by  which  the  payment  of  debts  is  postponed  to  some 
future  time. 

Characteristic. — The  feature  of  negotiable  paper  which  makes  it 
valuable  as  a  substitute  for  money,  is  the  fact  that,  in  the  hands  of  an 
honest  purchaser,  it  can  be  collected  whether  it  was  binding  in  the 
hands  of  the  original  holder  or  not.  Thus  a  negotiable  instrument 
given  by  A  to  B,  without  consideration,  cannot  be  collected  by  B,  but  if 
it  is  bought  by  C  he  can  enforce  payment  from  A.  This  peculiarity  is 
necessary  in  order  that  such  instruments  may  be  readily  transferred; 
one  would  not  care  to  buy  a  note  he  knew  nothing  about,  if  by  some 
irregularity  in  its  execution  he  might  lose  the  amount  it  represents. 
Negotiable  paper  is  sometimes  spoken  of  as  paper  that  can  be  trans- 
ferred, but  this  is  incorrect.  A  debt  of  any  kind  can  be  transferred, 
and  a  non-negotiable  note,  which  is  merely  evidence  of  debt,  can  be 
assigned  in  the  same  way  as  a  debt  not  evidenced  by  writing.  If  trans- 
ferred, however,  it  gives  the  buyer  no  rights  which  the  seller  did  not 
possess,  and  can  be  collected  by  liim  only  in  case  it  was  valid  in  the 
hands  of  the  original  holder. 

Necessary  Conditions.— Since  the  object  of  negotiable  paper  is  to 
serve  as  a  substitute  for  money,  it  must  be  written  in  such  a  form  that 
one  can  accept  it  without  hesitancy.  While  no  particular  form  of  words 
IS  necessary,  yet  an  instrument,  in  order  to  be  negotiable,  must  conform 
to  certain  conditions.     These  conditions  are  as  follows :     It  must  be 

51 


52  NEGOTIABLE    PAPER. 

(1)  in  writing,  (2)  properly  signed,  (3)  negotiable  in  form,  (4)  payable 
in  money,  (5)  to  a  designated  payee,  (6)  payable  absolutely. 

In  Writing'. — Every  negotiable  instrument  must  be  written.  By 
this  we  do  not  mean  that  it  must  be  written  with  a  pen  or  pencil,  by 
the  person  making  it,  but  simply  that  the  instrument  shall  be  impressed 
by  characters  upon  some  substance  (usually  paper).  A  printed  note  is 
just  as  good  as  a  written  one.  As  a  matter  of  fact,  a  large  part  of  the 
negotiable  instruments  used  in  the  business  world  are  partly  written  on 
blanks  printed  for  the  purpose.  The  writing  ought  to  be  in  ink  to 
secure  permanency  and  prevent  alterations,  but  if  written  with  pencil 
it  will  be  valid. 

Signature.  —  Paper  in  order  to  be  negotiable  must,  of  course,  be 
signed  by  the  party  executing  it.  The  object  of  signing  is  to  show  that 
the  party  has  made  the  promise  as  stated  in  the  instrument,  and  where 
this  can  be  shown  the  manner  of  the  signature  is  not  important.  It 
may  be  by  the  person  writing  on  the  face  or  back,  or  in  the  body  of  the 
instrument,  his  name  or  any  mark  he  may  choose  to  adopt  as  a  signa- 
ture, or  the  name  may  be  printed  by  him  or  his  authority.  The  usual 
method  is  for  the  party  to  write  his  name  at  the  close  of  the  instrument, 
since  where  this  is  done  there  can  be  no  doubt  of  his  having  assented 
to  it.  If  the  signature  is  made  in  any  other  way,  it  is  necessary  to  show 
by  witnesses  that  he  has  given  his  assent  to  the  instrument. 

]N"egotiable  in  Form. — By  being  negotiable  in  form  is  meant  it  must 
contain  words  which  indicate  an  intention  on  the  part  of  the  maker 
that  it  shall  be  negotiable.  The  usual  way  is  to  make  it  payable  to  a 
certain  person  "or  order,"  or  to  "the  order  of"  a  certain  jjcrson,  or  to  a 
certain  person  "or  bearer."  If  made  payable  simply  to  "the  bearer" 
it  is  also  negotiable.  Any  words,  in  fact,  which  express  an  intention 
that  it  shall  be  negotiable  are  sufficient. 

Payable  in  Money. — An  instrument  in  order  to  be  negotiable  must 
be  made  payable  in  money  only,  and  not  in  any  kind  of  goods  or  mer- 
chandise, or  by  the  performance  of  some  act.  A  person  who  accepts 
negotiable  paper  iu  satisfaction  of  a  claim  wants  to  know  exactly  what 
it  is  worth,  and  this  would  generally  be  impossible  if  made  payable  in 
anything  but  money  which  is  legal  tender. 

Designated  Payee. — In  a  negotiable  instrument  there  must  be  no 
uncertainty  as  to  whom  the  money  is  to  be  paid.  It  is  customary  to 
make  it  payable  to  a  person  by  name,  but  this  is  not  necessary  if  it  is 
written  in  such  a  way  that  the  payee  can  be  determined  from  it.  If 
payable  simply  to  bearer,  whoever  holds  it  at  maturity  is  the  designated 
payee.     Any  description  of  the  payee,  such  as  the  secretary  of  a  certain 


GENERAL   PRINCIPLES.  53 

corporation,  or  a  certain  county  officer,  etc.,  if  sufficiently  clear  to  make 
certain  the  person  intended,  is  sufficient. 

Payable  Absolutely. — Negotiable  paper  must  be  payable  absolutely; 
that  is,  it  must  signify  an  unconditional  obligation  to  pay.  There 
must  be  no  uncertainty  as  to  the  amount  and  no  contingency  as  to  the 
time  of  payment.  The  promise  of  payment  must  be  absolute  as  to 
(1)  amount,  and  (2)  time. 

Amount. — In  order  that  an  instrument  be  negotiable,  the  amount  to 
be  paid  must  be  certain  and  definite,  and  stated  in  the  body  of  the 
instrument.  It  is  customary  to  write  the  sum  of  money  in  words  in  the 
body  of  the  instrument,  and  express  it  in  figures  also  in  the  upper  or 
lower  left-hand  corner;  but  this  statement  in  figures  in  the  corner  is 
placed  there  merely  for  convenience  of  reference,  and  is  no  part  of  the 
instrument,  if  the  amount  as  stated  in  figures  does  not  agree  with  tliat  in 
words,  the  words  govern,  and  no  oral  evidence  can  be  introduced  to  show 
that  the  figures  are  correct.  If  the  amount  is  not  placed  in  the  body, 
although  it  is  in  figures  in  the  corner,  the  instrument  is  defective.  Not 
only  must  the  amount  be  placed  in  the  body  of  the  instrument  but  it 
must  be  certain.  A  promise  to  pay  at  a  certain  time  "  whatever  is  then 
due  "  is  not  negotiable.  Neither  is  a  promise  to  pay  a  certain  sum  out 
of  a  particular  fund,  because  the  payment  will  depend  upon  the  exist- 
ence of  the  fund. 

Time. — The  time  of  payment  must  not  depend  upon  any  contingency; 
that  is  it  must  be  sure  to  come.  A  note  made  payable  on  the  marriage 
of  a  certain  person,  or  on  his  arrival  at  majority,  is  not  negotiable,  be- 
cause there  is  no  certainty  that  either  of  these  events  will  ever  happen. 
If  made  payable  at  one's  death  it  is  negotiable,  since  it  is  sure  to  be 
payable  sometime.  It  i-s  usual  to  make  it  payable  at  a  certain  time 
after  date,  or  upon  a  certain  date.  If  made  payable  "on  demand,"  or 
"at  sight"  it  is  negotiable,  although  the  date  of  payment  is  placed  at 
the  discretion  of  the  holder.  In  this  case  the  date  of  payment  is  uncer- 
tain, but  since  the  rule  requiring  certainty  is  for  tlie  benefit  of  the 
holder,  there  is  no  reason  why  it  should  apply  in  this  case,  as  he  can 
make  it  certain  by  demanding  payment. 

Days  of  Grace. — Negotiable  instruments  become  due,  not  on  the 
day  mentioned  in  them,  but  in  reality  three  days  thereafter.  In  the 
early  history  of  negotiable  paper  it  was  customary  to  allow  the  one  who 
was  to  pay  it,  three  days  of  grace  in  which  to  make  preparations  to  meet 
it.  It  was  originally  simply  a  matter  of  favor,  as  the  name  signifies, 
and  might  be  granted  or  not  at  the  discretion  of  the  payee,  but  it  has 
since  grown  into  a  matter  of  right,  which  is  demanded.  Where  the  last 
day  of  grace  falls  on  Sunday  or  a  legal  holiday,  the  instrument  is  due 


54 


NEGOTIABLE    PAPER. 


on  the  day  preceding,  except  in  a  few  states. '  In  a  few  states  days  of 
grace  have  been  abolished  by  statute."  It  will  be  observed,  however, 
that  grace  is  allowed  only  on  negotiable  instruments.'  Non-negotiable 
instruments  falling  due  on  Sunday  or  a  holiday,  are  payable  on  the 
next  succeeding  business  day,  and  in  those  states  where  grace  has  been 
abolished  the  same  thing  is  true  of  negotiable  instruments. 

Value  Received. — These  words  are  usually  inserted  in  negotiable 
instruments,  but  they  have  no  effect  whatever.  They  simply  indicate 
that  value  has  been  received  by  the  maker,  but  do  not  prevent  him 
from  showing  the  contrary;  that  is,  even  if  the  words  are  used  they  do 
not  prevent  one  from  proving  by  other  evidence  that  value  has  not  been 
received.  On  the  other  hand  all  negotiable  instruments,  whether  they 
contain  these  words  or  not,  import  a  consideration,  that  is  they  indicate 
that  value  has  been  received,  until  the  contrary  is  shown." 

Kinds  of  Negotiable  Paper. — There  are  three  general  kinds  of 
negotiable  paper  in  use  in  the  commercial  world,  viz. :  promissory  notes, 
bills  of  exchange  or  drafts,  and  checks. 


1  In  Alabama,  Dakota,  Michigan  and  Missouri  it  is  due  on  the  succeeding  day. 

2 This  is  true  in  California,  Connecticut,  Georgia,  Idaho,  Illinois,  Montana,  New 
Jersey,  New  York,  North  Dakota,  Oregon,  Pennsylvania,  Utah,  Vermont,  Wisconsin. 

^  In  most  of  the  states  grace  is  not  allowed  on  sight  drafts  or  notes  payable  on 
demand. 

^  In  Missouri  and  possibly  a  few  other  states,  if  these  words  are  omitted  the  instru- 
ment is  not  negotiable.  Their  absence  does  not  affect  the  legality  of  the  paper,  but 
makes  it  simply  a  non-negotiable  note,  where  with  these  words  inserted  it  would  be 
negotiable. 

QUESTIONS. 

Define  negotiable  paper.  Give  its  use.  What  distinguishes  nego- 
tiable from  non-negotiable  paper?  What  is  said  of  the  importance  of 
this  characteristic?  Name  the  necessary  conditions  of  negotiability. 
What  is  meant  by  being  in  writing?  What  is  said  of  the  signature? 
What  is  negotiable  form?  In  what  must  negotiable  paper  be  pa^'able? 
Why?  What  is  said  of  the  payee?  What  is  meant  by  being  payable 
absolutely?  In  what  way  must  it  be  so  payable?  What  is  said  of  the 
statement  of  the  amount?  of  the  time?  What  are  days  of  grace?  What 
is  the  use  of  the  words  ''value  received?"  What  kinds  of  negotiable 
paper  are  there? 


CHAPTER    XIl. 


PROMISSORY    NOTES. 


Definition  and  Use. — A  promissory  note  is  a  promise  on  the  part  of 
one  person  to  pay  to  another  a  certain  sum  of  money  at  a  specified 
future  time.  As  we  have  seen,  a  large  part  of  the  business  of  the  world 
is  done  on  credit.  Where  one  person  buys  goods  of  another  to  be  paid 
for  at  some  future  time,  it  is  necessary  to  have  some  evidence  of  the 
debt  which  will  prevent  loss  and  misunderstanding,  and  the  promissory 
note  has  been  invented  to  meet  this  need. 

Form. — No  particular  form  is  necessary  to  make  a  valid  promissory 
note.  It  Avill  be  binding  if  the  form  is  such  as  to  make  a  promise  on 
the  part  of  one  person  to  pay  to  another  a  certain  sum  of  money  at  a 
specified  time.  Printed  blanks  are  now  generally  used  by  business  men. 
The  following  is  a  common  form  as  it  appears  after  being  filled  out: 

PROMISSORY  NOTE. 


%6'00^  Rochester,   N.  "i .,     Qwdf,  /,   1901. 

(j[/-n.e  ^a4^  after  date  0»    promise  to  pay  to  the  order  of 

(/(ft/^W     -0^5?^^^^    _ 

SQ^&    ^i'^u^c/'Uc/  €la^e/  -^  -^^..^.^^-^ ^    DOLLARS, 

Value  received.  _ 


Parties. — To  a  promissory  note  there  are  two  original  parties,  the 
maker  and  the  payee.  The  maker  is  the  person  promising  to  pay  and 
whose  name  is  signed  to  the  note.  In  the  above  example  Thomas  Jones 
is  the  maker.  The  payee  is  the  person  named  in  the  body  of  the  note 
to  whom  the  money  is  to  be  paid;  John  Smith  is  the  payee  in  the  fore- 
going example.  If  the  note  is  transferred  to  some  one  else  by  the  i)ayee, 
this  subsequent  party  in  whose  possession  the  note  is,  is  called  the 
holder  or  indorsee.  The  rule  as  to  competency  of  parties  to  a  note  is 
the  same  as  in  other  contracts. 

55 


56  NEGOTIABLE   PAPER. 

Negotiability.  —  Originally  promissory  notes  were  not  negotiable, 
but  they  have  been  made  so  by  statute  in  all  the  states.  In  order  to 
possess  the  quality  of  negotiability  they  must,  of  course,  conform  to  the 
conditions  of  negotiability  given  in  the  preceding  chapter.  The  note 
given  above  is  a  negotiable  note;  if  we  leave  out  the  words  "the  order 
of,"  it  will  not  be  negotiable.  Even  though  non-negotiable,  as  we  have 
seen,  it  can  be  transferred  by  John  Smith  by  assignment  like  any  debt, 
but  the  person  to  whom  it  is  assigned  takes  it  subject  to  all  tlic  defenses 
that  might  have  been  brought  against  it  in  John  Smith's  hand*. 

Consideration. — As  we  have  seen,  one  of  the  essentials  of  a  binding 
contract  is  a  consideration.  This  applies  to  negotiable  notes  as  well  as 
to  other  contracts.  In  order  to  be  binding  between  the  original  parties, 
there  must  be  a  consideration  or  inducement  for  the  promise  which 
would  be  sufficient  in  an  ordinary  contract.  After  the  note  has  been 
transferred  to  a  purchaser,  however,  this  necessity  for  a  consideration 
no  longer  exists.  A  person  who  gives  value  for  a  negotiable  note  can 
enforce  payment  from  the  maker,  even  though  there  was  no  consider- 
ation between  the  original  parties,  provided  he  took  it  without  knowl- 
edge of  the  want  of  consideration. 

Accommodation  Paper. — The  rule  that  no  consideration  is  neces- 
sary when  the  note  is  in  the  hands  of  a  subsequent  party  for  value,  is 
sometimes  made  use  of  in  what  is  called  accommodation  paper,  by 
which  one  party  lends  his  credit  to  another.  Suppose  A,  whose  credit 
is  not  good  at  the  bank,  desires  the  use  of  some  money  for  a  short  time. 
B,  to  whom  he  applies  for  a  loan,  has  no  money  at  hand,  but  his  credit 
at  the  bank  is  good.  B  makes  out  his  note  for  the  required  amount 
payable  to  A.  This  note,  being  without  consideration,  cannot  be  col- 
lected by  A,  but  he  takes  it  to  the  bank  and  has  it  discounted.  The 
bank  having  paid  for  the  note,  it  becomes  binding  upon  B,  and  he  is 
obliged  to  pay  it  the  same  as  if  it  had  been  originally  good.  In  tlie 
case  of  accommodation  paper,  the  maker  will  be  bound,  although  the 
purchaser  knows  it  to  be  without  consideration,  if  the  note  is  used  as 
agreed  between  the  original  parties. 

Holder  for  Value. — In  order  that  an  invalid  note  be  binding  in  the 
hands  of  a  subsequent  party,  he  must  be  what  is  called  a  holder  in  good 
faith  for  value;  that  is,  he  must  have  given  value  for  the  note,  and  not 
know  of  any  defenses  to  it.  He  must  buy  it  supposing  it  to  be  a  good 
note.  It  may  be  asked  what  is  giving  value?  It  is  the  giving  of  any- 
thing that  the  law  regards  as  a  valuable  consideration.  It  does  not 
need  to  be  the  face  value  of  the  note;  the  giving  of  anything,  in  fact, 
which  has  a  pecuniary  value  is  sufficient  to  make  the  subsequent  party 
a  holder  for  value.     While  negotiable  paper  may  be  the  subject  of  a 


PROMISSORY    NOTES.  57 

gift,  the  person  who  receives  it  in  this  way  gets  no  rights  which  the 
person  making  the  gift  did  not  have.  If  it  Avas  made  without  con- 
sideration, it  will  not  become  binding  by  being  given  to  a  third  party, 
because  he  is  not  a  holder  for  value. 

Lost  or  Stolen. — Where  negotiable  paper  is  lost  or  stolen,  the  finder 
or  thief,  not  being  a  holder  in  good  faith  for  value,  has  no  rights  what- 
ever to  it,  and  cannot  enforce  payment  of  it,  even  if  it  is  made  payable 
to  bearer.  But  the  person  coming  into  possession  of  a  note  in  this  way 
can  sell  it  to  another,  who  knows  nothing  of  his  want  of  title,  and  it 
can  then  be  enforced.  On  this  account  it  is  much  better  to  make  all 
negotiable  paper  payable  to  order,  since  it  can  then  be  transferred  only 
by  indorsement  of  the  payee. 

Forged. — Forgery  may  be  committed  by  signing  another's  name  to 
a  note  either  as  maker  or  indorser,  or  by  making  an  alteration  in  a 
genuine  instrument  so  as  to  change  the  amount  which  it  calls  for. 
Where  a  person's  name  is  fraudulently  signed  to  an  instrument  it  is 
absolutely  void,  and  no  one  can  acquire  any  rights  under  it  against  the 
person  whose  name  is  used  as  maker.  If  the  forgery  is  by  using  the 
person's  name  in  an  indorsement,  the  note  is  from  that  time  void,  and 
no  one  into  whose  hands  it  comes  after  that  can  acquire  any  rights  to 
it.  Where  the  forgery  is  by  raising  the  amount,  the  maker  can  be  held 
only  for  the  original  amount,  unless  it  is  through  his  negligence  or 
carelessness  that  the  forgery  were  possible.  If  he  writes  with  a  pencil 
so  the  amount  can  be  readily  erased,  or  leaves  a  blank  space  which 
enables  one  to  change  the  amount  without  detection,  he  can  then  be 
held  responsible  for  the  loss. 

Kinds  of  Notes. — With  reference  to  the  way  they  are  written  and 
signed,  there  are  three  different  kinds  of  promissory  notes  in  use,  viz. : 
(1)  several,  (2)  joint,  and  (3)  joint  and  several.  A  several  note  is  one 
with  only  one  maker,  like  the  one  given  above.  A  joint  note  is  one 
signed  by  two  or  more  persons  as  makers,  and  written  "  tve  promise  to 
pay."  In  this  case  the  obligation  to  pay  is  joint,  that  is,  it  rests  upon 
the  makers'  together,  not  separately,  and  if  the  holder  is  obliged  to  sue 
in  order  to  secure  payment,  he  must  sue  all  the  makers  together.  If 
the  note  is  written  "we  jointly  and  severally  promise,"  or  merely  "/ 
promise,"  and  signed  by  more  than  one  person  as  maker,  it  is  a  joint 
and  several  note,  and  this  is  true  even  though  one  of  the  names  is 
marked  "surety."  The  holder  in  enforcing  payment  can  sue  any  one 
of  the  makers,  or  all  together  as  he  pleases.  In  many  states  statutes 
have  been  passed  abolishing  the  distinction  between  joint,  and  joint  and 
several  notes,  so  that  all  notes  signed  by  more  than  one  maker,  no 
matter  how  they  are  worded,  are  joint  and  several. 


58  ifEGOTIABLE   PAPER. 

Bank  Bills  are  in  form  and  law  promissory  notes.  They  are  made 
payable  to  bearer  and  are,  of  course,  always  transferred  without  indorse- 
ment. When  a  common  promissory  note  is  offered  in  payment  of  a 
debt  or  for  discount,  the  first  inquiry  is  as  to  the  financial  standing  of 
the  maker  and  indorsers,  since  its  value  depends  upon  their  ability  to 
pay  it.  So  when  state  banks  issued  bank  bills,  everyone,  before  accept- 
ing them,  had  to  find  out  something  about  the  financial  standing  of  the 
bank  which  issued  them;  that  was  the  only  assurance  that  the  bills 
would  be  paid.  Our  recent  National  bank  notes  are  secured  by  deposit 
of  government  bonds  in  the  United  States  Treasury;  the  government 
thereby  becomes  an  indorser,  which  makes  them  perfectly  good  without 
regard  to  the  financial  standing  of  the  bank  which  issued  them. 

QUESTIONS. 

Define  promissory  note.  Give  use.  What  is  said  of  the  form?  Who 
are  the  original  parties  to  a  note?  Define  maker;  payee.  What  is  a  sub- 
sequent party  called?  Give  rule  as  to  competency  of  parties.  What 
is  said  of  the  negotiability  of  a  promissory  note  originally  ?  at  pres- 
ent? Can  a  non-negotiable  note  be  transferred  ?  What  is  said  of  con- 
sideration in  negotiable  note  between  original  parties  ?  in  the  hands 
of  subsequent  purchaser  ?  What  is  accommodation  paper?  Give  its 
use.  What  is  a  holder  in  good  faith  for  value?  What  rights  has  a 
person  receiving  negotiable  paper  as  a  gift?  What  rights  has  a  person 
to  negotiable  paper  who  finds  or  steals  it?  How  may  forgery  be  com- 
mitted ?  What  effect  has  it  on  the  note?  Define  several  note;  joint 
note;  joint  and  several  note.     How  are  bank  bills  considered  in  law? 


CHAPTER  XIII. 


BILLS   OF    EXCHANGE. 


Definition. — A  bill  of  exchange  is  a  written  order  by  one  person  to 
another  to  pay  to  the  order  of  a  third  person  or  to  the  bearer,  a  certain 
sum  of  money  at  a  certain  specified  time.  The  term  draft  is  simply 
another  word  meaning  the  same  thing  as  bill  of  exchange.  The  dis- 
tinguishing feature  between  bills  of  exchange,  or  drafts,  and  notes  is, 
that  a  note  is  a  promise  on  the  part  of  the  one  signing  it  to  pay  the 
money,  whereas  in  the  draft  he  orders  another  to  pay  it. 

Origin  and  Use. — The  origin  of  bills  of  exchange  is  a  question  that 
has  never  been  definitely  settled,  but  it  is  only  of  historical  importance. 
A  method  of  paying  debts  between  cities  remotely  situated  and  engaged 
in  commerce  with  each  other,  without  the  trouble  and  risk  of  sending 
the  money  back  and  forth,  would  certainly  be  much  desired  in  the  early 
history  of  commerce,  and  the  bill  of  exchange  is  about  the  only  Avay, 
certainly  the  most  convenient  way,  in  which  this  can  be  accomplished. 
The  draft  is  used  in  two  ways.  If  A  in  Chicago  owes  B  in  New  York 
one  hundred  dollars,  he  goes  to  a  Chicago  bank  with  his  one  hundred 
dollars  and  buys  a  draft  for  that  amount  on  a  bank  in  New  York,  pay- 
ing in  addition  to  the  one  hundred  dollars  a  few  cents  for  the  bank's 
trouble  m  writing  out  the  draft.  This  draft  he  sends  to  B  who  presents 
it  to  the  New  York  bank  and  receives  his  money.  This  is  one  method. 
The  draft  in  this  case  is  an  order  from  the  Chicago  bank  to  the  New 
York  bank  to  pay  to  B  one  hundred  dollars,  which  in  form,  is  like  the 
following: 

BANK   DRAFT. 


No.  /p'^S. 


THE    FIRST    NATIONAL    BANK, 

Chicago,   III.,    J?.^  /,    1901. 
Pay  to  the  order  of 

DOLLARS, 


■^e 


^2^u^>^i^iee/  -JQ0 


To  CHEMICAL  NAT   BANK, 

New  York,   N.  Y. 


j3^e<H^.e   {Jr.    S-ee^^, 


Cashier. 


59 


60 


NEGOTIABLE    PAPER. 


Suppose  C  in  New  York  owes  D  in  Chicago  one  hundred  dollars  and  D 
wants  his  money.     D  goes  to  the  same  Chicago  bank  and  draws  a  draft 


on  C  like  the  following: 


INDIVIDUAL  DRAFT. 


$/^^-S 


Chicago,    III.,     J2f^-  ^0,    1901. 
Atsight  paytotheorderof  THE  FIRST  NAT.  BANK,  Chicago,  III. 


■ne 


^2<Tt^-3^€^-le€^  tza^^ 


00 
100 


and  charge  to  account  of 


^^ 


DOLLARS, 


■W^^ttf^yiiZ^ 


This  is  an  order  by  D  to  C  telling  him  to  pay  to  the  bank  one  hundred 
dollars.  This  is  sent  to  the  New  York  bank  which  presents  it  to  C  and 
he  pays  it.  "When  the  Chicago  bank  is  notified  of  this  fact  it  pays  the 
one  hundred  dollars  to  D.  In  the  first  instance  the  New  York  bank 
paid  out  one  hundred  dollars  for  the  Chicago  bank;  the  Chicago  bank 
now  pays  out  the  same  amount  for  the  New  York  bank;  no  money  has 
been  sent  but  the  account  between  them  is  balanced. 

Foreign  Bills  of  Exchange.  —  There  are  two  kinds  of  bills  of 
exchange,  foreign  and  inland.  A  foreign  bill  is  drawn  in  one  country 
to  be  paid  in  another.  This  includes  not  only  countries  that  are  foreign 
to  each  other,  in  the  ordinary  acceptation  of  the  term,  but  it  applies  to 
those  drawn  in  one  state  of  the  United  States  to  be  paid  in  another. 
A  draft  drawn  in  New  York  and  payable  in  Kansas  is  a  foreign  bill. 
When  bills  of  exchange  originated,  means  of  communication  between 
different  countries  Tvere  not  so  safe  and  sure  as  at  present,  and  on  ac- 
count of  this  risk  it  was  customary  to  draw  several  copies  of  a  bill 
(usually  three)  and  send  them  by  different  routes,  or  at  different  times, 
so  that  if  one  was  lost  one  of  the  others  would  reach  its  destination. 
While  the  law  still  refers  to  the  three  copies  of  tlie  foreign  bill  they 
are  not  now  so  frequently  used.  Between  the  different  states  of  the 
Union  more  than  one  copy  is  never  used.  Where  a  bill  is  drawn  in  one 
country  and  payable  in  another,  it  is  made  payable  in  the  currency  of 
the  country  in  which  it  is  to  be  paid. 

Inland  Bill. — The  bill  of  exchange  originated  in  the  necessity  of 
havmg  some  means  of  paying  debts  from  one  country  to  another  with- 
out sending  the  money,  and  at  first  there  were  only  foreign  bills.    Their 


BILLS    OF    EXCHANGE.  61 

couvenience  and  safety  naturally  led  to  their  use  in  settling  domestic 
accounts,  so  that  now  nearly  all  remittances  are  made  in  this  way.  In 
the  United  States  an  inland  bill  is  one  payable  in  the  same  state  in 
which  it  is  drawn. 

Parties. — In  a  bill  of  exchange  there  are  three  jiarties,  the  draAver, 
drawee,  and  payee.  The  drawer  is  the  one  who  draws  the  bill,  the 
drawee  the  one  on  whom  it  is  drawn  or  who  is  ordered  to  pay  it,  and 
the  payee  the  one  to  whom  the  money  is  to  be  paid.  In  the  first  draft 
above,  the  First  National  Bank  is  the  drawer,  the  Chemical  National 
Bank  the  drawee,  and  J.  E.  King  the  payee.  In  the  other,  John 
Brown  is  the  drawer,  the  First  National  Bank  the  payee,  and  James 
Thompson  the  drawee. 

When  Due.  —  With  reference  to  the  time  of  payment,  there  are 
two  kinds  of  drafts,  time  drafts  and  sight  drafts.  A  sight  draft  is 
drawn  payable  "at  sight,"  that  is,  when  it  is  presented  to  the  drawee 
for  payment.  Time  drafts  are  drawn  payable  on  a  certain  date,  a  cer- 
tain time  after  date,  or  a  certain  number  of  days  "after  sight,"  that  is, 
a  certain  number  of  days  after  being  presented  for  payment.  Time 
drafts  are  allowed  days  of  grace  the  same  as  promissory  notes,  but  in 
most  of  the  states  grace  is  not  allowed  on  sight  drafts. 

Acceptance. — A  bill  of  exchange  being  simply  an  order  to  pay  money, 
is  not  binding  on  the  drawee  without  his  consent,  and  until  he  has  con- 
sented to  it  he  is  under  no  legal  obligation  to  pay  it.  To  drafts  payable 
on  presentation  this  consent  is  given  by  payment.  If  payable  a  certain 
time  after  sight  it  is  given  by  what  is  called  acceptance.  The  payee 
presents  the  draft  to  the  drawee,  and  if  he  is  willing  to  pay  it  at  the 
time  specified,  he  writes  across  the  face  the  word  "accepted"  with  the 
date  and  signs  his  name.  By  so  doing  he  promises  to  pay  it,  makes 
it  in  fact  as  far  as  he  is  concerned,  a  promissory  note  with  himself  as 
maker. 

Liability  of  Parties. — The  drawee,  by  his  act  of  acceptance,  be- 
comes the  acceptor  and  is  bound  absolutely  to  pay  the  bill.  Before  the 
acceptance  of  the  bill  it  is  really  a  contract  between  the  drawer  and  the 
payee,  by  which  the  drawer  agrees  that  the  drawee  shall  accept  and  irdj 
it,  and  if  he  does  not  that  he  (the  drawer)  will  pay  it  himself.  Of 
course  this  is  not  written  in  the  bill  but  it  is  implied,  and  is  as  binding 
as  though  expressed.  The  drawee  is  not  therefore  originally  a  party  to 
the  bill,  and  may  not  even  know  of  the  existence  of  it  until  it  is  pre- 
sented to  him.  His  liability  begins  with  his  acceptance.  If  he  refuses 
to  accept  the  draft,  or  having  accepted  it  refuses  to  pay  it  when  due, 
the  payee,  by  properly  notifying  tlie  drawer  of  these  facts,  can  compel 
him  to  pay  it. 


63  NEGOTIABLE    PAPEK. 

Preseutmeiit  for  Acceptance. — Drafts  payable  on  a  certain  day, 
or  a  certain  time  after  date,  do  not  need  to  be  presented  at  all  until 
they  are  due,  and  then  only  for  payment ;  but  bills  payable  a  certain 
time  after  sight  must,  of  course,  be  presented  for  acceptance  in  order  to 
fix  the  date  of  maturity.  Presentment  is  also  necessary  in  order  to  hold 
"the  drawer  responsible  for  their  payment.  As  we  have  seen,  the  drawer 
of  a  draft  contracts  with  the  payee  that  the  drawee  will  accept  and  pay 
it  when  due,  and  if  he  fails  to  do  this,  the  drawer  becomes  responsible; 
but  in  order  to  hold  him  to  his  liability  the  draft  must  be  presented 
for  acceptance,  and  the  drawer  immediately  notified  in  case  of  refusal 
to  accept.  Presentment  must  be  made  by  the  holder  or  his  agent  to 
the  drawee  or  his  agent  authorized  to  accept  it,  within  a  reasonable 
time  after  receiving  the  draft.  Just  what  is  a  reasonable  time  must  be 
decided  by  the  court  in  view  of  the  circumstances  of  each  particular 
case.  In  one  case  it  might  only  be  a  few  days  and  in  another  a  few 
weeks.  Presentment  may  be  made  to  the  drawee  or  his  agent  at  his 
place  of  business  during  business  hours,  or  at  his  residence  at  any 
reasonable  hour. 

Lictter  of  Credit. — Sometimes  an  agreement  is  made  beforehand  to 
accept  drafts  when  they  are  drawn.  This  is  in  efiect  an  acceptance,  and 
will  be  considered  in  law  as  such  whether  acceptance  is  given  or  not. 
The  most  frequent  use  of  this  kind  of  an  agreement  is  in  what  is  called 
a  letter  of  credit  used  by  European  tourists.  A  letter  of  credit  for  a 
certain  amount  is  taken  by  the  traveler,  and  this  being  an  agreement  of 
a  reliable  firm  to  pay  drafts  drawn  by  the  holder  to  a  certain  amount, 
enables  him  to  draw  any  amount  he  may  need,  up  to  a  certain  sum,  in 
the  different  countries  he  visits,  thus  saving  the  trouble  of  carrying  the 
money  with  him  and  changing  from  one  kind  to  another.  As  money 
is  drawn  the  amount  is  indorsed  on  the  letter,  so  any  one  to  whom  it  is 
presented  can  see  that  the  amount  to  which  it  entitles  the  holder  is  not 
overdrawn      Letters  of  credit  are  generally  not  negotiable. 

Negotiability. — The  bill  of  excliange  is  the  oldest  form  of  negotiable 
paper.  It  can  be  transferred  the  same  as  a  note  and  possesses  the  same 
quality  of  being  binding  in  the  hands  of  a  holder  in  good  faith  for  value 
without  regard  to  whether  it  was  originally  good.  It  may  be  transferred 
at  any  time  before  due,  either  before  or  after  being  accepted. 

QUESTIONS. 

Define  bill  of  exchange.  Distinguish  between  it  and  a  note.  What 
is  said  of  the  use  of  drafts,  (1)  in  paying  debts,  (2)  in  collecting  debts? 
What  are  foreign  bills  generally?   in  the  United  States?     In  what  cur- 


BILLS    OF  EXCHANGE.  63 

rency  payable?  What  is  an  inland  bill?  AVliat  are  the  parties  to  a  bill 
called  ?  What  are  sight  drafts  ?  time  drafts  ?  What  is  acceptance  ? 
effect  of  ?  Give  tlie  liability  of  the  different  parties  to  a  draft,  before 
acceptance;  after  acceptance.  What  is  said  of  presentment  for  accept- 
ance? What  is  a  letter  of  credit?  Give  its  use.  What  is  said  of  the 
negotiability  of  a  bill  of  exchange? 


CHAPTER  Xiy. 


CHECKS. 


Definition. — A  check  is  a  draft  or  order  drawn  on  a  bank  or  banker, 
by  a  person  who  is  supposed  to  have  funds  on  deposit  there,  payable  on 
demand,  without  grace.  It  is  in  most  respects  like  a  bill  of  exchange, 
but  differs  from  it  in  that  it  is  always,  and  must  necessarily  be,  drawn 
upon  a  bank  or  banker,  and  is  always  payable  on  demand  and  without 
grace.  A  check  is  always  supposed  to  be  drawn  against  funds  previously 
deposited  in  the  hands  of  the  bank  for  the  purpose  of  being  checked 
out.  The  parties  to  a  check  are  the  same  as  those  to  a  draft,  viz.: 
drawer,  drawee,  and  payee,  the  drawee  always  being  a  bank. 

Use. — It  is  unsafe  and  very  inconvenient  for  a  business  man  who 
receives  and  pays  out  very  much  money,  to  handle  the  money  itself  all 
the  time.  The  money  can  be  deposited  in  a  bank  subject  to  check,  and 
whenever  there  is  an  occasion  to  pay  any  out,  an  order  on  the  bank 
specifying  the  exact  amount  is  given  the  party  to  be  paid.  This  being 
paid  by  the  bank,  there  is  never  any  inconvenience  in  making  change, 
and  the  money  is  always  safe  in  the  vaults  of  the  bank.  There  is  also 
another  very  gi-eat  advantage  in  this  way  of  handling  money.  Whetlier 
a  check  is  payable  to  order  or  to  bearer  most  banks  require  the  payee  to 
sign  his  name  on  the  back  before  they  will  cash  it.  This  check  coming 
back  to  the  drawer  with  the  payee's  name  on  the  back,  and  marked 
paid,  is  a  receipt  from  the  payee  for  the  amount  of  money  which  it 
calls  for. 

Form. — In  form  the  check  differs  a  little,  and  but  little,  from  the 
bill  of  exchange.  The  address  of  the  drawee  instead  of  being  placed 
in  the  lower  left-hand  corner  is  usually  written  in  large  letters  at  the 
top  and  in  the  center.  As  the  check  is  alvvays  payable  on  demand  it 
says  nothing  about  the  time  the  money  is  to  be  paid.  Books  containing 
blank  checks  are  furnished  by  the  bank  to  those  who  have  money  on 
deposit  and  the  checks  are  filled  out  as  needed.  The  following  is  a 
common  form  of  check  as  it  appears  after  being  filled  out: 

64 


CHECKS.  -  65 


BANK   CHECK. 


$^4—  Salina,    Kansas,       (?^^   /,     1901. 

THE    AMERICAN    NATIONAL    BANK, 

Pay  to  the   order  of  '^.  J2^    (Sm^^^-^e,  ^  ^^..^.^.^^^.^^^ . 

C^\-t^e-i^^=^t^i  t^y^fT?  '^QQ  -v,-./-w-^..>^..-N.-.^.-^^.^.-^-^^s-^  DOLLARS. 
No.   Y6.  ^^-     ^-     C>^<^^^^'?'??^-2<:o 


Neg-otiability. — Like  the  note  and  tlie  bill  of  exchange,  the  check 
may  be  either  negotiable  or  non-negotiable.  If  it  conforms  to  all  the 
conditions  of  negotiability  given  in  a  previous  chapter  it  is  negotiable, 
and  can  then  be  transferred  by  indorsement  or  delivery  like  so  much 
money,  the  only  thing  to  prevent  its  being  freely  accepted  as  such  being 
doubt  of  the  drawer's  responsibility. 

Liability  of  Parties.  —  As  in  the  case  of  a  bill  of  exchange,  the 
drawer  impliedly  contracts  with  the  payee  and  indorsees  that  he  has 
funds  on  deposit  with  the  bank  on  which  it  is  drawn,  and  that  on  being 
presented  there  the  check  will  be  paid.  This  of  course  the  bank  will 
always  do  if  the  drawer  has  money  on  deposit,  and  if  he  is  perfectly 
responsible  financially  it  will  sometimes  cash  his  checks  when  he  has  no 
money  there,  reimbursing  itself  when  he  again  has  money  on  deposit. 
If  the  bank  refuses  to  pay  a  check  it  cannot  generally  be  sued  by  the 
holder,  even  if  the  drawer  has  money  on  deposit,  but  in  case  of  such 
refusal  the  drawer  immediately  becomes  responsible,  and  can  be  sued  on 
the  check  if  he  is  given  the  proper  notice  of  the  bank's  refusal. 

Presentment. — While  the  check  is  negotiable  and  can  very  readily, 
and  as  a  matter  of  fact  does  circulate  to  some  extent  as  money,  it  is  not 
intended  to  so  circulate.  Since  it  is  payable  immediately  it  is  the  duty 
of  the  holder  to  present  it  to  the  bank  for  payment  within  a  reasonable 
time  after  receiving  it.  Just  what  is  a  reasonable  time  depends  upon 
circumstances.  If  the  holder  receives  the  check  in  the  same  town  where 
the  bank  is  located,  he  has  all  of  the  next  day  after  receiving  it  in  which 
to  make  presentment.  If  the  bank  is  in  a  different  town,  he  has  all  of 
the  next  day  in  which  to  mail  it  to  someone  there  for  presentment. 
The  fact  that  the  check  is  not  presented  within  a  reasonable  time  will 
not,  of  itself,  release  the  drawer  from  his  liability.  He  must  first  show 
damage  to  himself  by  reason  of  the  delay.  If  the  bank  remains  solvent, 
any  amount  of  time  can  elapse  without  discharging  the  drawer  from  his 
liability;  but  if  after  a  reasonable  time  has  elapsed,  the  bank  should 
5 


66  NEGOTIABLE   PAPEE.    » 

fail  before  the  check  is  presented,  the  liokler  will  be  the  loser,  provided 
the  drawer  had  money  on  deposit  to  meet  it. 

Certification. — Checks  furnish  a  very  convenient  method  of  paying 
debts,  but  they  cannot  always  be  safely  accepted  instead  of  money, 
because  there  is  nothing  to  prevent  one  from  drawing  a  check  on  a 
bank  in  which  he  has  no  funds  on  deposit.  On  this  account  business 
men,  before  they  will  take  a  check  from  a  stranger,  frequently  require 
that  it  be  "certified."  Again  it  is  frequently  desirable  that  a  check  be 
transferred  from  one  person  to  another  like  money,  but  before  one  can 
safely  accept  a  check  he  must  have  some  assurance  that  it  will  be  paid. 
This  can  only  be  given,  if  he  does  not  know  the  financial  standing  of 
the  drawer,  by  certification.  Certification  is  to  a  check  much  the  same 
as  acceptance  to  a  draft.  A  person  who  wishes  to  have  a  check  certified 
presents  it  to  the  proper  officer  of  the  bank,  and  if  the  drawer  has 
money  on  deposit  the  officer  writes  or  stamps  across  the  face  of  the 
check  the  word  ''good,"  or  something  which  means  the  same,  and  signs 
his  name.  The  bank  from  that  time  becomes  responsible  for  its  pay- 
merit  the  same  as  an  acceptor  on  a  draft,  and  this  is  true  whether  the 
drawer  had  any  money  on  deposit  or  not,  and  even  if  the  check  is 
forged.  On  certification  of  a  check  the  amount  is  taken  from  the  de- 
positor's credit  on  the  books  of  the  bank,  the  same  as  if  it  had  been  paid 
out,  otherwise  it  might  be  checked  out  again  before  the  certified  check 
is  presented  for  payment,  and  the  bank  thus  be  compelled  to  pay  it 
twice.  The  principal  difference  between  certification  of  a  check  and 
acceptance  of  a  draft  is  that  in  certification  the  drawer  is  released  from 
liability,  whereas  the  acceptance  of  a  draft  does  not  so  release  him. 

Forged  Checks. — When  a  person  opens  up  an  account  with  a  bank 
by  depositing  money  subject  to  check,  the  bank  requires  him  to  write  his 
name  in  a  signature  book,  just  as  it  will  be  signed  to  his  checks.  This 
is  done  in  order  that  the  bank  may  be  al)le  to  tell  whether  the  signatures 
to  checks  presented  are  genuine,  by  comparing  them  with  the  signature 
in  the  book.  It  is  the  duty  of  the  bank  to  know  the  signature  of  every- 
one of  its  customers,  and  if  by  a  failure  to  do  so  it  pays  a  check  that  is 
forged,  the  bank  alone  is  responsible.  If  a  genuine  check  is  changed 
by  having  the  amount  raised,  and  the  bank  pays  it,  only  the  original 
amount  can  be  charged  to  the  drawer,  unless  by  his  carelessness  in 
drawing  the  check  he  made  it  possible  for  the  change  to  be  made  with- 
out detection.     In  that  case  he  must  bear  the  loss. 

Certificate  of  Deposit. — It  often  happens  that  a  person  who  keeps 
no  regular  account  at  a  bank  wishes  to  deposit  money  for  safe  keeping 
for  a  short  time.  It  is  customary  for  the  bank  in  such  cases  to  receive 
the  money  and  give  the  depositor  a  certificate  of  deposit  or  cashier's 


CHECKS.  67 

check.  The  certificate  of  deposit  certifies  that  the  person  has  deposited 
in  the  bank  to  the  credit  of  himself  a  certain  sum  of  money,  payable  on 
presentation  of  the  certificate  properly  indorsed.  It  is  dated  and  signed 
by  the  cashier  or  teller. 

Cashier's  Check.  —  The  cashier's  check  is  a  check  drawn  in  the 
usual  form  by  the  cashier  or  teller  in  his  official  capacity  upon  his  bank 
for  the  amount  deposited,  and  payable  to  the  order  of  the  depositor. 
Both  the  certificate  and  the  cashier's  check  are  negotiable  and  transfer- 
able in  the  same  manner  as  other  negotiable  paper.  Either  is  in  effect 
a  certified  check,  consequently  the  money  which  it  rei)resents  cannot  be 
checked  out  by  the  depositor,  because  if  the  bank  should  allow  the 
money  to  be  taken  out  in  this  way  it  would  be  compelled  to  pay  it  again 
on  presentation  of  the  certificate  or  cashier's  check. 

QUESTIONS. 

Define  check.  Distinguish  between  check  and  draft.  What  are  the 
parties  to  a  check  called?  How  is  the  check  used?  What  is  said  of  its 
convenience  and  safety?  In  what  does  the  form  of  a  check  differ  from 
that  of  a  bill  of  exchange?  What  is  said  of  its  negotiability?  What 
is  said  of  the  liability  of  the  parties  to  a  check?  When  must  a  check 
be  presented  for  payment?  Give  the  effect  of  a  failure  to  so  present  it. 
What  is  certification?  Give  its  object  and  effect.  What  difference  is 
there  between  certification  of  a  check  and  acceptance  of  a  draft?  What 
will  be  the  effect  if  a  bank  pays  a  forged  or  raised  check?  How  can  the 
bank  tell  if  a  check  is  genuine?  What  is  a  certificate  of  deposit?  a 
3ashier's  check? 


CHAPTER  XY. 


TRANSFER. 


Assignment. — At  common  law  a  chose  in  action,  that  is,  a  claim 
which  can  be  enforced  by  a  suit  at  law,  could  not  be  transferred  so  as 
to  enable  another  to  enforce  it  in  his  own  name.  This,  however,  has 
generally  been  changed  by  statute  so  that  now  all  claims,  except  a  few 
that  are  prohibited  from  being  transferred,  can  be  transferred  and  suit 
brought  in  the  owner's  name.  A  non-negotiable  note  being  simply 
written  evidence  of  a  claim  can  be  transferred  unless  it  is  given  for  a 
claim  that  is  not  transferable.  This  transfer  is  called  an  assignment, 
and  may  be  made  orally  or  by  written  statement  of  the  intention  to 
transfer  on  the  instrument  itself  or  a  separate  paper. 

Indorsement. — The  word  indorsement  means  literally  writing  on  the 
back,  and  in  this  sense  any  instrument  of  indebtedness  can  be  indorsed. 
The  word,  however,  is  used  in  a  technical  sense  and  means  the  writing 
of  one's  name  on  the  back  of  an  instrument  with  intent  to  incur  a 
peculiar  conditional  liability.  In  this  sense  the  term  is  applied  only  to 
negotiable  paper.  Indorsement  is  simply  a  contract  by  which  the  holder 
of  a  negotiable  paper  agrees  to  transfer  the  title  to  the  instrument,  and 
on  certain  conditions,  which  are  discussed  further  on,  to  become  respon- 
sible for  its  payment.  Being  a  contract,  it  must  be  supported  by  a  con- 
sideration. The  term  indorsement  includes  also  the  idea  of  delivery, 
since  the  title  to  the  instrument  is  not  transferred  until  after  delivery. 
An  indorsement  is  necessary  to  transfer  the  title  only  in  case  of  those 
instruments  which  are  made  payable  to  order,  but  an  instrument  made 
payable  to  bearer  can  be  indorsed.' 

Who  May  Indorse. — Any  one  who  holds  the  legal  title  to  a  negotia- 
ble instrument  and  is  capable  of  making  a  binding  contract  can  make 
an  indorsement.  If  the  instrument  is  payable  to  bearer,  any  one  in 
whose  possession  it  comes  can  indorse  it,  if  he  is  capable  of  contracting, 
even  if  the  instrument  is  found  or  stolen.  If  a  note  is  payable  to  some 
one  who  is  not  capable  of  contracting,  like  a  minor  or  lunatic,  he  can 

1  In  Illinois  and  Alabama,  indorsement  is  necessary  to  pass  the  legal  title  to  paper 
payable  to  a  designated  person  or  bearer. 

68 


TRANSFER.  69 

by  indorsement  pass  a  good  title  against  any  one  but  himself,  but  he 
cannot  by  that  act  deprive  himself  of  the  right  to  the  paper.  lie  can 
at  any  time  avoid  the  indorsement  and  recover  the  paper.  If  the  paper 
is  payable  to  a  partnership  it  can  be  indorsed  by  any  member  of  the 
firm,  but  only  in  the  firm  name. 

Liability  of  Indorser.— The  indorser  by  the  act  of  indorsement, 
impliedly  contracts  with  his  indorsee  and  with  every  subsequent  holder, 
(1)  that  the  instrument  itself,  including  all  the  signatures  before  his  own, 
is  genuine;  (2)  that  all  the  parties  are  competent  to  contract;  (3)  that 
he  has  a  good  title  to  the  paper;  (4)  that  the  paper  is  not  invalid  be- 
cause its  execution  violates  some  law;  (5)  that  the  paper  will  be  paid 
when  due  on  presentation  to  the  proper  party.  In  case  of  a  breach  of 
any  of  these  warranties,  except  the  last,  the  holder  can  proceed  at  once 
against  the  indorser,  without  making  any  demand  on  the  original  par- 
ties, but  in  case  of  a  breach  of  the  last,  demand  of  payment  must  be 
made  on  the  original  party,  and  the  indorser  notified  of  the  refusal. 

Methods  of  Indorsing-.— There  are  several  ways  of  indorsing  nego- 
tiable paper  in  common  use  in  business  transactions,  the  most  important 
of  which  are,  (1)  in  full,  and  (2)  in  blank,  either  of  which  may  be 
(3)  without  recourse,  and  (4)  restrictive  indorsements. 

FORMS  OF   INDORSEMENT. 


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Indorsement  in  Fvill. — By  a  full  indorsement  the  indorser  directs 
the  payment  of  the  instrument  to  be  made  to  a  particular  payee.  He 
does  it  by  writing  across  the  back  of  the  paper  "  Pay  to  C.  D.  or  order," 
or  words  to  that  effect,  and  signing  his  name  underneath  the  words. 
This  is  the  safest  indorsement,  because  if  the  paper  is  lost  or  stolen  it 
cannot  be  again  transferred  without  the  signature  of  C.  D.  It  is  there- 
fore the  method  generally  adopted  to  guard  against  loss  of  the  paper  in 
transmitting  it  from  place  to  place. 

Indorsement  in  Blank. — When  the  indorser  writes  his  signature 
only,  across  the  back  of  a  note  or  bill,  it  is  said  to  be  indorsed  in  blank. 


70  NEGOTIABLE    PAPEE. 

After  the  person  named  as  payee  has  thus  indorsed  it,  the  instrument 
is  transferable  by  delivery  the  same  as  though  payable  to  bearer,  and 
may  be  transferred  any  number  of  times  without  further  indorsement. 
Where  a  note  or  bill  is  indorsed  in  blank,  a  subsequent  holder  may 
write  over  the  indorsement  words  making  it  payable  to  himself,  thus 
making  it  a  full  indorsement.  After  this  it  can  only  be  transferred  by 
indorsement.  If  a  bill  is  once  indorsed  in  blank  subsequent  indorse- 
ments in  full  will  not  prevent  its  being  payable  to  bearer  as  long  as  the 
blank  indorsement  is  not  filled  up,  since  any  one  into  whose  hands  it 
comes  can  make  it  payable  to  himself  by  filling  up  the  blank  indorse- 
ment. 

Indorsement  Without  Recourse. — It  sometimes  happens  that  a 
payee  or  indorsee  wishes  to  transfer  a  negotiable  instrument,  payable  to 
order,  without  assuming  the  liability  of  an  indorser.  Since  he  can  only 
transfer  it  by  indorsement,  he  writes  on  the  back  of  the  note  the  words 
"without  recourse"  and  signs  his  name  underneath.  By  this  form, 
called  indorsement  without  recourse,  he  conveys  the  title,  but  expressly 
refuses  to  be  responsible.  No  subsequent  holder  can  have  any  claim  on 
him,  because  of  the  refusal  of  the  original  party  to  pay  the  bill  or  note. 
As  we  have  seen,  however,  the  indorser  contracts  with  the  indorsee  on 
five  different  points,  of  which  jjayment  is  one.  An  indorsement  without 
recourse  relieves  him  from  liability  only  on  this  one  point,  holding  him 
responsible  for  all  the  others  the  same  as  an  ordinary  indorsement;  that 
is  if  the  note  is  a  forgery;  if  any  of  the  parties  are  incompetent  to  make 
contracts;  if  the  indorser  has  not  a  good  title;  or  if  the  note  is  invalid 
because  of  having  been  given  in  violation  of  law,  the  indorser  without 
recourse  is  responsible.  Either  the  blank  or  the  full  indorsement  may 
be  made  without  recourse. 

Restrictive  Indorsement.  —  It  is  sometimes  desirable  to  transfer 
negotiable  papier  to  another  for  some  purpose,  like  collection,  and  at  the 
same  time  prevent  him  from  further  transferring  it.  This  can  be  done 
by  what  is  called  a  restrictive  indorsement.  In  this  case  the  indorser 
writes  on  the  back  of  the  instrument  "Pay  to  B  only"  or  "Pay  to  B 
for  collection,"  An  indorsement  like  this  is  notice  to  all  that  the  in- 
strument is  simply  held  in  trust  so  that  the  legal  title  cannot  be  trans- 
ferred. The  holder  by  this  kind  of  indorsement,  in  case  the  maker 
refuses  to  pay,  cannot  bring  an  action  on  the  note  in  his  own  name, 
but  only  in  the  name  of  the  person  for  whom  the  collection  is  to  be 
made. 

Time  of  Transfer. — The  time  at  which  negotiable  jjaper  is  trans- 
ferred has  much  to  do  with  the  rights  of  the  holder.  As  we  have  seen, 
the  holder  of  negotiable  paper  in  good  faith,  for  value,  has  an  absolute 


TRANSFER.  71 

right  to  enforce  payment,  without  regard  to  the  rights  of  the  one  from 
whom  he  obtains  it.  This  is  true,  however,  only  in  case  it  comes  into 
his  possession  before  maturity.  The  fact  that  paper  is  past  due  and 
unpaid  is  enough  to  arouse  suspicion  of  its  validity  in  the  mind  of  any 
one  to  whom  it  is  offered.  If  he  takes  it  then  he  must  take  it  subject 
to  all  the  defenses  that  might  have  been  set  up  against  it  in  the  hands 
of  the  one  from  whom  he  obtained  it. 

QUESTIONS. 

Define  assignment.  "What  may  be  assigned  ?  Define  indorsement. 
To  what  is  it  applied  ?  When  is  indorsement  necessary?  Who  may 
indorse  a  negotiable  instrument  ?  What  effect  has  the  indorsement 
of  a  minor?  How  must  a  partnership  indorse?  Give  the  liability  of  an 
indorser.  What  methods  of  indorsing  are  there?  What  is  an  indorse- 
ment in  full?  its  effect?  in  blank?  without  recourse?  Give  the  liability 
of  an  indorser  without  recourse.  Give  object  and  effect  of  restrictive 
indorsement.  What  has  the  time  of  transfer  to  do  with  the  rights  of 
the  holder? 


CHAPTER  XTI. 


DEMAND   AND    NOTICE. 


Ifecessity. — In  order  to  hold  liable  the  drawer  and  indorsers  on  a 
bill,  and  the  indorsers  on  a  note,  it  is  necessary  to  demand  payment  of 
the  maker  on  the  day  of  maturity,  and  notify  these  j)arties  of  his  refusal. 
They  are  liable  only  on  condition  that  they  have  immediate  notice  of 
the  fact  that  the  maker  or  acceptor  refuses  to  pay,  and  that  they  are  to 
be  looked  to  for  payment.  Demand  on  the  day  of  maturity  is  not 
necessary  in  order  to  hold  the  maker  and  acceptor;  they  are  responsible 
if  the  bill  or  note  is  presented  at  any  time  before  it  becomes  outlawed. 

Excuses  foi"  ]Von-Preseiitment.  —  There  are  some  circumstances, 
however,  which  will  excuse  a  failure  to  make  presentment  for  payment 
on  the  day  of  maturity,  and  still  hold  the  drawer  and  indorsers.  Any 
condition  of  affairs  which  makes  presentment  impossible  or  very  incon- 
venient will  excuse  a  failure,  as  long  as  the  impossibility  continues.  If 
the  residence  of  the  maker  or  acceptor  is  unknown,  and  by  the  exercise 
of  reasonable  diligence  cannot  be  found,  or  if  he  has  moved  into  an- 
other state,  presentment  is  unnecessary.  If  the  maker  -or  acceptor 
should  die  and  administrators  have  not  been  appointed  on  the  day  of 
maturity,  it  will  be  sufficient  to  go  to  his  residence  with  the  paper.  No 
one  being  there  to  pay,  it  will  be  considered  as  dishonored.  Sickness 
and  death  of  or  injury  to  the  holder,  happening  so  shortly  before  ma- 
turity that  provision  for  presentment  on  the  day  of  maturity  cannot  be 
made,  will  be  a  sufficient  excuse,  provided  presentment  be  made  as  soon 
after  maturity  as  possible.  So  also  an  agreement  on  the  part  of  the 
drawer  or  indorser  that  presentment  is  not  necessary  will  excuse  failure. 

Where  and  to  Whom. — If  the  place  of  payment  is  named  in  the 
instrument,  demand  must  be  made  there.  If  no  place  of  payment  is 
named,  then  demand  should  be  made  at  the  residence  or  place  of  busi- 
ness of  the  maker  or  acceptor.  On  the  street  is  not  a  good  place  to 
make  presentment,  but  if  the  maker  or  acceptor  is  met  on  the  street, 
and  the  paper  presented  to  him  there  for  payment,  it  will  be  a  good 
demand,  unless  he  objects  because  of  the  place.  The  demand  should 
be  made  on  the  maker  or  acceptor,  if  it  is  possible  to  find  him.  In  case 
of  death  of  the  one  who  is  to  make  payment,  demand  must  be  made  of 

72 


DEMAND   AND   NOTICE.  73 

his  executor  or  administrator,  if  one  has  been  appointed.  It  is  the  duty 
of  everyone  to  make  provision  to  meet  his  obligations  as  they  become 
due,  and  if  the  maker  or  acceptor  cannot  be  found  at  his  residence  or 
place  of  business,  demand  may  be  made  of  any  one  found  at  either 
place,  who  has  arrived  at  years  of  discretion. 

When  and  by  Whom. — Demand  must  be  made  on  the  day  of  ma- 
turity, that  is  on  tlie  last  day  of  grace,  unless  there  exists  a  valid  excuse 
for  failure.  If  made  at  the  place  of  business  of  the  maker  or  acceptor, 
it  should  be  made  during  business  hours,  although  if  someone  author- 
ized to  pay  is  found  there  after  business  hours,  and  demand  made  of 
him,  it  will  be  good.  If  made  at  his  place  of  residence,  it  should  be  at 
a  reasonable  hour,  when  one  is  expected  to  receive  visitors.  If,  how- 
ever, the  person  making  demand  is  received,  and  allowed  to  present  the 
paper  for  payment,  it  will  be  good  at  any  hour.  Demand  may  be  made 
by  the  holder  of  the  paper  or  his  authorized  agent,  or  by  any  one  in 
whose  hands  it  is  for  collection. 

Manner. — No  particular  formalities  are  required  in  making  present- 
ment, but  the  paper  itself  should  be  exhibited  so  that  the  promissor  can 
inspect  it,  if  he  so  desires.  If  an  actual  exhibition  of  the  paper  is  not 
made,  demand  should  be  accompanied  by  some  statement  or  indication 
that  the  paper  is  in  the  possession  of  the  party  making  presentment,  so 
that  it  can  be  seen  if  desired.  Many  notes  are  made  payable  at  a  bank 
or  at  the  office  of  a  certain  person,  and  where  this  is  the  case  all  that  is 
necessary,  in  the  way  of  demand,  is  that  the  note  be  at  that  place  on 
the  day  of  maturity.  It  is  then  the  duty  of  the  maker  to  come  there, 
and  if  he  wishes  to  see  the  note  he  must  make  a  request  to  that  effect. 

Payment. — If  the  maker  of  a  note  or  acceptor  of  a  bill  pays  it,  the 
drawer  or  indorsers  are  immediately  released  from  all  further  liability 
on  account  of  it.  Payment  must,  of  course,  be  made  to  the  one  having 
title  to  the  paper.  If,  however,  it  is  made  payable  to  bearer,  payment 
made  to  one  having  the  paper  in  his  possession,  even  though  he  has  not 
a  good  title,  will  discharge  the  maker  unless  he  knew  he  was  paying  to 
one  not  entitled  to  payment.  If  the  paper  is  payable  to  order,  payment 
to  any  one  not  having  the  title  to  the  paper  will  not  release  the  maker. 
Payment  should  never  be  made  until  the  paper  is  due,  unless  it  is  sur- 
rendered" and  cancelled  ;  because  if  it  should  afterwards,  and  before 
maturity,  get  into  the  hands  of  a  holder  in  good  faith  for  value,  it 
could  be  collected  again. 

Protest. — In  case  payment  of  a  note  or  bill  has  been  demanded  and 
refused,  it  becomes  necessary  to  have  some  evidence  of  this  fact,  should 
the  drawer  or  indorsers  have  to  be  sued.  If  the.  parties  all  live  in  the 
same  place,  the  fact  of  the  demand  and  refusal  can  be  easily  established 


74  NEGOTIABLE    PAPER. 

by  witnesses,  but  in  case  of  a  foreign  bill  of  exchange  this  is  very  diffi- 
cult, and  sometimes  practically  impossible.  On  this  account  the  law 
requires  that  all  foreign  bills  must  be  protested,  either  for  non-j^ayment 
or  non-acceptance,  or  the  drawer  and  indorsers  will  not  be  responsible. 
The  protest  is  a  formal  declaration  in  writing,  by  a  notary  public,  of 
the  demand  and  refusal  to  pay.  The  notary  takes  the  bill  himself  and 
demands  payment  in  order  that  he  may  speak  from  his  own  knowledge 
of  the  refusal,  and  then  writes  out  a  statement  that  he  has  presented 
and  demanded  payment  of  the  bill,  and  that  payment  has  been  refused, 
giving  the  place  and  date,  and  that  he  protests  against  the  drawer  and 
indorsers  of  the  bill.  The  notary  then  sends  written  notices  of  the 
protest  to  the  drawer  and  indorsers.  He  also  makes  a  statement  in  the 
protest  itself  of  this  fact  of  notification,  giving  names  of  the  jiarties 
notified,  and  the  manner  of  giving  notice.  He  then  affixes  his  name 
and  seal  to  the  paper,  and  the  protest  is  complete.  It  is  then  attached 
to  the  bill  and  kept  by  the  holder  as  evidence  of  the  protest.  The  pro- 
test should  be  made  on  the  same  day  on  which  payment  is  demanded 
and  refused,  which,  of  course,  is  the  day  of  maturity.  If  the  drawee 
of  a  foreign  bill  refuses  to  accept  it  when  presented,  the  same  protest 
is  necessary  with  the  change  in  form  to  show  that  it  is  protested  for 
non-acceptance. 

FORM   OF  PROTEST. 

Statjc  of  Illinois, )  ^^ 

County  of  Cook,        ) 

I,  Myron  T.  Ely,  a  Notary  Piihlic  in  and  for  the  county  afore- 
said, Ss  Sgrgbf  QsMfy,  that  on  the  27th  day  of  June,  in  the  year 
of  our  Lord  one  thousand  nine  Jiundred  and  one,  at  the  request 
of  the  Chicago  JVational  Bank,  I  did  present  the  original  hill, 
which  is  hereunto  annexed,  at  Chicago,  III.,  and  deinanded  pay- 
ment of  the  acceptor  thereof,  ivhich  was  refused. 

W&SFSupes,  I,  the  said  JVotary,  did  Protest,  and  by  these  Presents 
do  publicly  and  solemnly  Protest,  as  ivell  against  the  diriwer  and 
indorsers  of  the  said  bill  as  against  all  others  whom  it  doth  or 
may  concern,  for  exchange,  re-exchange,  and  all  costs,  damages 
and  interest,  already  incurred  or  to  be  hereafter  incurred,  for 
want  of  payment  of  the  said  bill. 

AM  J  iQ  Furthsp  igstiif,  that  on  the  same  day  and  year  above 
written,  due  notice  of  the  foregoing  Protest  (by  notice  partly 
printed  and  partly  widtten,  signed  by  me)  was  given  to  the 
draiver  and  the  several  indorsers  thereon  by  depositing  notices  in 
the  post  office  at  Chicago,  III.,  postage  paid,  directed  as  follows : 


DEMAND    AND   NOTICE.  75 

D.  D.  Knettles,  Springfield,  III. 
Hunt  Sf  Helm,  Harvard,  III. 
Henry  French,  Milivaukee,  Wis. 
Felix  J.  Griifin,  Hyde  Park,  III. 
Each  of  the  above-named  places  being  the  reputed  place  of  resi- 
dence of  the  persons  to  whom  the  notice  ivas  directed,  and  the 
Post  Office  nearest  thereto. 

Thus  MQse  sai  Pmtssfsd,  at  the  city  of  Chicago,  III.,  the  day 
and  year  first  above  ivritten. 
[&.  ^.  ]    la  Tsstimonf  WtsmBi,  I  have  hereunto  set  my  hand  and 
affixed  my  seal  of  office. 

MYRON  T.   BLY. 

Notary  Public. 

Notice  of  Non-Payment.  —  Although  formal  j^rotest  by  a  notary 
public  is  not  necessary  on  a  promissory  note  or  an  inland  bill,  it  is 
necessary  that  the  drawer  and  indorsers  be  notified  of  the  non-payment 
or  non-acceptance.  No  particular  form  is  required  in  giving  the  notice. 
It  need  not  even  be  in  writing,  although  it  is  better  to  give  a  written 
notice,  since  in  that  case  it  is  much  easier  to  prove  that  notice  has  been 
properly  given.  All  that  is  necessary  is,  that  the  notice  show  the  fact 
that  presentment  and  demand  of  payment  or  acceptance  has  been  made 
and  refused.  It  may  be  given  by  a  notary  public,  and  in  that  case  his 
certificate  will  be  evidence  that  it  has  been  jjroperly  given,  but  in  the 
majority  of  cases  it  is  given  by  the  holder  of  the  note  or  bill. 

FORM   OP   NOTICE. 

Chicago,  III.,  June  27,  1901. 
To  Messrs.  Hunt  ^'  Helm.* 

That  a  certain  bill  of  D.  D.  Knettles  for  one  thousand  dollars, 
payable  sixty  days  after  sight,  dated  April  15,  1892,  drawn  on 
and  accepted  by  Elwood  S.  Jones,  and  indorsed  by  you,  was  this 
day  presented  for  payment,  and  payinent  having  been  demanded 
and  refused,  the  holder  looks  to  you  for  the  payment  thereof. 

MYRON  T.   BLY, 

Notary  Public, 
At  Chicago  National  Bank. 
It  is  desirable  that  you  notify  your  prior  indorser,  if  any. 

Service  of  the  Notice.  —  Where  the  parties  all  live  in  the  same 
place,  the  drawer  or  indorsers  must  be  notified  on  the  day  demand  is 


76 


NEGbXIABLE    PAPER. 


made,  or  the  following  day.  If  Lliey  do  not  live  in  the  same  place,  so 
that  the  notice  must  be  given  by  mail,  it  must  be  deposited  in  the  post- 
office  in  time  to  be  taken  by  the  mail  leaving  on  the  day  after  demand 
and  refusal.  A  failure  to  so  notify  relieves,  of  course,  the  drawer  and 
indorsers  from  their  obligation.  The  holder  need  only  notify  the  in- 
dorser  immediately  prior  to  himself,  if  he  is  willing  to  depend  entirely 
on  him  for  payment.  It  is  customary  and  better  to  send  notices  to  all. 
Each  indorser  has  one  day  after  receiving  notice  in  which  to  notify  the 
indorser  prior  to  himself. 

Waiver  of  Notice. — It  frequently  happens  that  the  holder  of  a  note 
does  not  desire  to  have  the  trouble  of  sending  notices,  nor  the  risk  of 
loss  from  a  failure  to  give  the  notice  at  the  proper  time.  Or  it  may  be 
desired  to  save  the  expense  of  protesting.  This  can  be  done  by  an 
agreement,  either  written  or  oral,  to  waive  protest  and  notice  of  non- 
payment. Frequently  an  agreement  of  this  kind  is  printed  on  the 
blank  on  which  the  note  is  written,  and  where  this  is  the  case  all  who 
indorse  it  are  bound  by  the  agreement  and  are  not  entitled  to  notice. 
Such  agreements  are  usually  in  the  body  of  the  note  like  the  following 
form : 


FORM   OP   WAIVER   OP   NOTICE. 


Tlie  indorsers  hereon  herehy  waive  protest  and  notice  of  non- 
payment. 


QUESTIONS. 

What  is  said  of  the  necessity  of  demand  ?  What  will  excuse  it  ? 
Where  must  demand  be  made?  to  whom?  when?  by  whom?  What  is 
said  of  the  manner  of  making  presentment?  What  effect  has  payment? 
To  whom  must  it  be  made?  What  is  protest?  where  necessary?  give 
process  of  making.  Where  is  notice  of  non-payment  necessary?  how 
may  it  be  given?  when?  What  is  a  waiver  of  protest  and  notice?  How 
is  it  given? 


CHAPTER  XTII. 


GUARANTY  AND    SURETYSHIP. 


Definition. — A  surety  or  guarantor  is  one  who  agrees  to  become 
responsible  for  the  debt  or  default  of  another  ;  that  is,  to  pay  damages 
in  case  the  other  does  not  perform  his  obligations.  There  is  a  slight 
distinction  between  the  two,  but  it  is  not  of  sufficient  importance  nor 
sufficiently  plain,  to  admit  of  discussion  here.  We  shall  consider  them 
both  as  falling  under  the  same  definition.  A  guaranty,  being  a  contract, 
must,  of  course,  have  all  the  necessary  conditions  of  a  contract,  but  the 
definition  implies  the  existence  of  a  principal  contract  to  which  the 
guaranty  is  merely  collateral.  For  example  A  owes  B  a  certain  sum  of 
money;  this  constitutes  the  principal  contract.  C  agrees  with  B  that  he 
will  pay  the  debt  if  A  does  not;  this  is  the  collateral  contract — the  guar- 
anty. It  is  evident  from  this  that  there  must  be  at  least  three  parties 
to  every  guaranty,  the_principal  debtor,  or  the  one  who  is  primarily 
responsible,  the  creditor,  or  the  one  to  whom  he  is  responsible,  and  the 
guarantor  or  surety.  A  guaranty,  being  an  agreement  to  answer  for 
the  default  of  another,  must  be  in  writing  according  to  one  of  the  pro- 
visions of  the  Statute  of  Frauds. 

Kinds  of  Guaranties. — Guaranty  is  a  very  common  kind  of  con- 
tract. It  includes  all  such  agi'eements  as  sureties  and  indorsements  on 
negotiable  paper,  and  all  bonds  given  for  the  faithful  performance  of 
some  duty,  such  as  are  required  of  clerks  in  banks,  treasurers  of  corpo- 
rations, public  officers,  etc.  The  guaranty  with  which  we  deal  prin- 
cipally in  this  book  is  for  the  payment  of  money,  and  of  this  class 
there  are  three  kinds  in  general  use  ;  viz.,  guaranty  of  payment,  guar- 
anty of  collection,  and  continuing  guaranty. 

Guaranty  of  Payment. — This  is  a  kind  of  guaranty  very  much 
used.  By  it  the  guarantor  engages  unconditionally  that  if  the  debtor 
does  not  pay  the  debt  he  will  pay  it  himself.  If  he  wishes  to  guarantee 
the  payment  of  a  note,  he  simply  writes  on  the  back  something  like 
this,  *'For  value  received  I  hereby  guarantee  the  payment  of  this 
note"  and  signs  his  name  ;  or  he  simply  signs  his  name  on  the  face  of 
the  note,  usually  below  tliat  of  the  maker,  with  the  word  surety  after 
it.     By  this,  payment  is  absolutely  guaranteed,  and  the  surety  or  guar- 

77 


78  GUARANTY    AND    SURETYSHIP. 

antor  becomes  liable  for  the  amount  immediately  on  the  refusal  of  the 
debtor.  Nor  is  he  entitled  to  prompt  demand  and  notice  of  refusal  like 
an  endorser.  If  he  can  show  that,  by  the  creditor's  failure  to  make 
demand  of  the  debtor  on  the  day  of  maturity,  or  by  his  failure  to  send 
notice  of  refusal,  he  has  suffered  actual  loss  which  he  might  otherwise 
have  avoided,  then  he  will  be  relieved  from  his  liability  ;  but  unless  he 
can  show  this  he  will  be  held.  It  is,  however,  always  best  to  send 
notice  to  sureties  and  guarantors  within  a  reasonable  time  after  refusal. 

Guaranty  of  Collection. — In  this  form  of  guaranty  the  guarantor 
writes  on  the  back  of  the  note,  *'For  value  received  I  hereby  guarantee 
the  collection  of  this  note  "  and  signs  his  name.  These  two  forms  of 
guaranty  differ  considerably  in  their  legal  effect.  The  former  is  an 
agreement  that  the  maker  of  the  note  will  pay  it  when  due,  and  in 
case  he  fails  to  do  so  that  the  guarantor  himself  will  pay  it.  In  the  lat- 
ter, however,  the  guarantor  agrees  to  pay  tlie  note  in  case  the  holder 
cannot  collect  tlie  amount  due  from  the  maker.  This  places  upon  the 
creditor  the  necessity  of  first  showing  his  inability  to  collect.  He  can- 
not do  this  by  merely  making  a  demand,  and  accepting  as  conclusive 
the  debtor's  refusal  to  pay  or  his  statement  of  inability  to  do  so.  He 
must,  as  a  rule,  sue  the  debtor,  and  attempt  to  enforce  payment  by  the 
regular  legal  means.  A  judgment  against  him,  and  the  return  of  an 
execution  thereon  unsatisfied,  is  usually  held  to  be  sufficient  evidence 
of  inability  to  collect  from  the  debtor,  to  compel  payment  from  the 
guarantor.  The  creditor  must  not  unnecessarily  delay  proceedings 
against  the  debtor,  since  a  loss  of  the  claim  through  his  negligence 
would  release  the  guarantor.  Having  failed  to  get  anything  from  the 
debtor,  he  may  proceed  to  collect  from  the  guarantor,  and  in  addition 
to  the  amount  of  the  note  he  can  collect  whatever  costs  he  has  had  to 
pay  in  his  attempt  to  enforce  payment  from  the  debtor. 

But  suit  is  not  always  necessary.  If  the  debtor  before  maturity  of 
the  note  removes  from  the  state,  leaving  no  property  which  can  be 
taken  on  execution,  the  holder  may  proceed  at  once  to  enforce  payment 
from  the  guarantor.  Guaranties  in  these  words,  "  I  warrant  this  note 
good,"  and  like  expressions,  are  in  effect  guarantees  of  collection,  and 
the  holder  must  show  that  collection  is  impossible  before  he  can  require 
the  guarantor  to  pay. 

Continuing-  Guaranty. — This  form  of  guaranty  is  given  for  the 
purpose  of  securing  the  payment  of  debts  made  at  different  times  after 
the  guaranty  is  given.  For  example  E.  W.  Ober  writes  and  delivers  to 
the  H.  D.  Lee  Mercantile  Co.  the  following  : 

"  For  value  received,  I  hereby  guarantee  the  payment  of  the  purchase 
price  of  all  goods  that  may  be  hereafter  sold  to  J,  F.  Helming  by  the  H. 


GUARANTY     AND    SURETYSHIP.  79 

D.  Lee  Mercantile  Co.  upon  the  usual  terms  of  credit,  to  the  amount  of 
five  thousand  dollars,  for  which  payment  this  is  designed  as  a  continuing 
guaranty.^' 

July  1, 1901.  E.  W.   Ober. 

This  is  a  continuing  guaranty.  It  will  furnish  security  to  J.  F.  Hen- 
ning  for  all  purchases  from  the  H.  D.  Lee  Mercantile  Co.  uji  to  the 
amount  stated  in  the  agreement.  Nor  will  it  be  extinguished  as  soon 
as  the  amount  is  reached.  He  can,  after  purchasing  to  the  full  amount, 
pay  off  a  portion  and  the  guaranty  can  then  be  used  again  up  to  the 
limit. 

Consideration. — Where  the  guaranty  is  made  at  the  same  time  with 
the  principal  contract,  one  consideration  will  support  both.  If  A  bor- 
rows money  of  B,  and  C  signs  the  note  as  security,  B  is  induced  to  let  A 
have  the  money  by  the  promise  of  C  to  be  responsible  for  its  payment,  and 
after  C  has  thus,  by  his  promise  to  be  responsible,  induced  B  to  advance 
the  money,  the  law  will  not  permit  him  to  refuse  performance.  If  the 
guaranty  is  made  after  the  principal  debt,  it  cannot  be  on  the  strength 
of  it  that  the  money  is  advanced.  C's  promise  in  that  case  must  have 
a  consideration  to  support  it,  and  it  is  customary  in  such  cases  to  pay 
one  dollar,  or  some  such  nominal  sum,  to  make  the  promise  binding. 

Creditor's  Rights. — The  creditor's  rights  in  the  contract  of  guar- 
anty depend,  of  course,  on  the  terms  of  the  contract.  He  can  do 
nothing  until  the  principal  debtor  is  in  default.  As  soon,  however,  as 
default  is  made  he  is  entitled  to  proceed  at  once  against  the  surety  or 
guarantor,  and  enforce  the  performance  of  his  obligation,  whatever  it 
may  be. 

Surety's  Rig-hts. — Against  Creditor. — The  most  important  of  the 
surety's  rights  against  the  creditor  is  what  is  known  as  subrogation.  If 
the  surety  is  compelled  to  pay  the  claim  against  the  principal  debtor  he  is 
entitled  to  all  the  means  which  the  creditor  possesses  to  enforce  pay- 
ment. That  is,  he  is  entitled  to  stand  in  the  place  of  the  creditor  and 
have  all  the  securities  transferred  to  him  with  the  right  to  enforce 
them.  If  the  surety  has  mortgaged  his  property  with  that  of  the  prin- 
cipal debtor,  he  is  entitled  to  have  the  debtor's  sold  first,  and  the  pro- 
ceeds of  the  sale  applied  to  the  payment  of  the  debt,  before  taking  his 
own. 

Against  Deltor. — So  long  as  the  principal  debtor  is  not  in  default, 
the  surety  has  no  rights  against  him  by  reason  of  their  relationship. 
The  moment,  however,  that  default  occurs  the  surety  may  discharge 
the  debt  and  proceed  at  once  to  collect  from  the  principal,  and  he  may 
recover  not  only  the  amount  of  the  debt  and  interest  but  all  costs  he 
may  have  been  compelled  to  pay.     If  the  surety  is  disi3osed  to  do  so,  of 


80  GUARANTY    AND    SURETYSHIP. 

course  he  can  wait  until  he  is  forced  by  the  creditor  to  pay  the  debt, 
and  then  compel  the  principal  debtor  to  reimburse  him. 

Co-Sureties. — Where  several  sureties  unite  in  a  guaranty,  each  one 
enters  into  the  same  contract  with  the  creditor,  and  each  is  bound  to 
contribute  equally  with  the  others  to  the  satisfaction  of  the  debt,  if  the 
debtor  fails  to  make  payment.  If  one  of  the  sureties  pays  the  whole 
debt  he  may  compel  the  others  to  contribute  their  respective  shares, 
and  if  one  is  insolvent  the  others  must  still  bear  the  burden  equally. 
For  example,  if  there  are  four  sureties  and  one  pays  the  whole  debt  he 
can  call  upon  each  of  the  others  to  repay  to  him  one  fourth  of  the 
amount  advanced,  and  enforce  such  repayment  by  action;  but  in  case  one 
■should  be  insolvent,  then  the  other  two  would  each  be  obliged  to  contrib- 
ute one  third  of  the  sum  advanced.  This  is  known  in  law  as  the  right 
of  contribution  between  co-sureties.  Where  one  of  several  sureties 
takes  from  the  principal  debtor  a  mortgage  to  indemnify  him  against 
his  liability,  the  co-sureties  have  an  interest  in  the  security  so  taken  ; 
and  in  case  of  the  principal  debtor's  default  such  security  must  be 
applied  to  the  reduction  of  the  liability  of  all.  The  right  of  contribu- 
tion exists  only  where  there  is  nothing  in  the  agreement  to  alter  their 
relations.  If  the  last  surety  adds  to  his  signature,  "surety  for  the 
above  names,"  or  words  to  that  effect,  he  does  not  become  a  co-surety, 
and  if  he  should  pay  the  debt  he  could  compel  the  others  to  reimburse 
him  for  all  he  had  to  pay.  On  the  other  hand  if  one  of  the  others 
pays  it,  the  one  who  has  signed  bis  name  in  this  way  cannot  be  com- 
pelled to  reimburse  him  for  any  share  of  the  debt. 

Discharge  of  Surety. — There  are  several  ways  in  which  a  surety 
may  be  discharged  from  liability.  In  case  of  a  continuing  guaranty 
the  most  important  of  these  are,  (1)  expiration  of  time,  and  (2)  notice 
from  the  guarantor.  In  case  of  guarantors  to  single  contracts,  like 
sureties  on  bonds,  notes,  etc.,  the  most  important  are,  (I)  alteration  of 
the  agreement,  (3)  giving  time  to  the  principal,  and  (3)  fraud  practiced 
upon  the  guarantor. 

Expiration  of  Time. — A  continuing  guaranty  is  sometimes  given 
for  a  definite  time,  as  one  year  or  six  months ;  and  in  such  cases  it  is 
extinguished  by  the  expiration  of  the  time  specified.  This,  of  course, 
only  relieves  the  guarantor  from  responsibility  for  new  debts.  He  is 
still  responsible  for  the  payment  of  all  debts  made  within  the  time 
during  which  the  guaranty  was  in  force. 

Notice  from  Guarantor. — When  a  continuing  guaranty  is  given 
for  an  unlimited  time,  it  may  be  terminated  by  notice  to  the  creditor 
from  the  guarantor,  and  in  case  it  is  so  determined  the  effect  is  the 
same  as  where  it  occurs  by  expiration  of  time.     The  guarantor  is  held 


GUARANTY    AND    SURETYSHIP.  81 

for  all  debts  made  before  the  notice  was  given,  but  not  for  those  made 
after.  Even  where  the  guaranty  is  given  for  a  certain  time,  the  guar- 
antor, by  giving  notice,  can  terminate  it  unless  he  has  received  a  con- 
sideration for  the  use  of  his  credit. 

Alteration  of  Agreement. — Any  change  in  the  agreement  by  inter- 
lineation or  erasure  made  by  the  creditor  and  principal  debtor,  without 
the  consent  of  the  guarantor,  will  discharge  him  from  his  liability 
under  it.  Such  alterations  have  the  effect  of  creating  a  new  and  dif- 
ferent agreement,  consequently  the  surety  can  be  held  responsible  on 
this  only  by  his  own  consent. 

Giving-  Time  to  Principal. — This  is  in  effect  a  change  of  the  agree- 
ment, and  if  made  without  the  surety's  consent  will  discharge  him  from 
his  liability.  However,  it  requires  something  more  than  a  mere  prom- 
ise on  the  part  of  the  creditor  to  wait  on  the  debtor,  to  discharge  the 
surety.  It  requires  a  valid  agreement  to  extend  the  time.  The  cred- 
itor may  promise  the  debtor  to  give  him  a  little  more  time  in  which 
to  meet  his  obligation,  but  this  promise,  being  without  consideration, 
is  not  binding.  Notwithstanding  this  promise,  the  creditor  can  bring 
suit  against  the  debtor  immediately.  Such  a  promise  as  this  will  not 
discharge  the  surety.  If,  however,  the  debtor  should  pay  a  part  of  the 
debt  before  it  becomes  due,  and  in  consideration  of  this  payment  the  cred- 
itor should  extend  the  time  of  payment  of  the  balance,  this  agreement, 
being  binding  on  the  creditor,  would  discharge  the  surety  if  made 
without  his  consent.  Blanks  used  by  banks  in  making  out  notes  fre- 
quently have  printed  in  them  a  statement  that  the  sureties  waive  their 
right  to  be  discharged  by  reason  of  extension  of  time,  and  in  such  cases 
the  surety  is  still  held,  although  time  of  payment  is  extended  by  a  valid 
agreement. 

Fraud  on  Guarantor. — Any  fraud  practiced  on  the  guarantor  by 
the  creditor  or  by  the  debtor  with  the  creditor's  consent,  which  induces 
him  to  become  guarantor,  will  release  him  from  his  obligation.  Also, 
if  the  principal  contract  is  fraudulent  and  can  be  avoided  on  that 
ground,  the  surety  is  not  held  liable  for  its  payment. 

QUESTIONS. 

Define  guaranty ;  give  example  ;  what  are  the  parties  to  a  contract  of 
guaranty  ?  What  kinds  of  guaranties  are  there  ?  What  is  guaranty 
of  payment  ?  What  can  you  say  of  the  necessity  of  making  demand 
and  notifying  the  surety  of  non-payment.  What  is  guaranty  of  collec- 
tion ?  Under  what  circumstances  is  a  guarantor  of  collection  liable  ? 
What  is  a  continuing  guaranty  ?  Give  liability  of  such  a  guarantor. 
What  is  said  of  consideration  in  guaranty  ?    What  is  said  of  the  cred- 


82  GUARANTY    AND    SURETYSHIP. 

itor's  rights  iu  guaranty  ?  the  sureties'  rights  against  the  creditor  ? 
against  debtor  ?  What  is  the  right  of  contribution  ?  Where  does  it 
exist  ?  How  may  a  surety  be  discharged  from  liability?  What  is  said 
of  surety  being  discharged  by  expiration  of  time?  When  the  guaranty 
is  terminated  by  notice  from  guarantor,  what  is  the  effect?  Why  will 
alteration  of  agreement,  without  consent  of  guarantor,  discharge  him 
from  liability  under  it?  What  is  said  of  giving  time  to  principal  ?  of 
fraud  on  guarantor? 


CHAPTER  XYIII. 


INTEREST  AND  USURY. 


Interest  is  a  compensation  paid  for  the  use  of  money.  The  sum  of 
money  loaned  is  called  the  principal,  and  upon  this  sum  the  interest  is 
reckoned  at  a  certain  rate  per  centum,  usually  abbreviated  to  per  cent., 
which  means  by  the  hundred.  When  no  time  is  specified  in  the  agree- 
ment, the  law  will  presume  that  the  rate  mentioned  is  by  the  year,  but 
it  is  usual  in  formal  contracts  to  specify  the  rate  at  a  certain  rate  per 
annum;  hence  where  money  is  loaned  at  six  ])er  cent.,  it  means  that  the 
lender  is  to  receive  from  the  borrower  six  dollars  per  year  on  each  hun- 
dred loaned. 

Legal  Rate. — The  statutes  of  all  the  states  provide  that  in  case  there 
is  a  legal  agreement  to  pay  interest,  but  no  rate  is  mentioned,  then  a 
certain  rate  shall  be  paid.  This  rate,  so  fixed  by  the  statutes  in  each 
state,  is  called  the  legal  rate,  and  is  the  rate  which  can  be  collected 
when  no  rate  is  specified  and  there  is  an  agreement  to  pay  interest.*  Of 
course,  where  there  is  no  law  to  the  contrary,  parties  can  agree  on  any 
rate  of  interest  they  please,  and  the  rate  being  specified  in  the  contract, 
can  be  collected.'^  In  many  states,  however,  provision  is  made  by  law 
that  nothing  above  a  certain  rate  can  be  collected,  even  if  it  is  agreed 


'  In  Illinois  and  Louisiana  the  legal  rate  is  five  per  cent.  It  is  six  per  cent,  in 
the  following  states:  Arkansas,  Connecticut,  Delaware,  District  of  Columbia,  In- 
diana, Indian  Territory,  Iowa,  Kansas,  Kentucky,  Maine,  Maryland,  Massachusetts, 
Michigan,  Mississippi,  Missouri,  New  Hampshire,  New  Jersey.  New  Mexico,  New 
York,  North  Carolina,  Ohio,  Pennsylvania,  Rhode  Island,  Tennessee,  Texas,  Ver- 
mont, Virginia,  and  West  Virginia.  Seven  per  cent,  in  the  following:  Arizona,  Cali- 
fornia, Georgia,  Minnesota,  Nebraska,  Nevada,  North  Dakota,  Oklahoma  Territory, 
South  Carolina,  South  Dakota,  and  Wisconsin.  Eight  per  cent,  in  Alabama,  Colo- 
rado, Florida,  Oregon,  and  Utah.  Ten  per  cent,  in  Idaho,  Montana,  and  Washing- 
ton.   Twelve  per  cent,  in  Wyoming. 

2  The  following  states  have  no  law  limiting  the  amount  of  interest  that  can  be 
taken:  Arizona,  California,  Colorado,  Connecticut,  Maine,  Massachusetts,  Mon- 
tana, Nevada,  and  Rhode  Island. 

83 


84  INTEREST   AND    USURY. 

upon,  and  this  rate  is  known  as  the  maximum  rate.'  "Where  such  a 
rate  is  established  by  law  the  parties  can  agree  upon  any  rate  up  to  this, 
but  agreements  to  pay  a  higher  rate  of  interest  than  this  maximum 
rate  are  void. 

On  What  Allowed. — Claims  on  which  interest  can  be  collected  may 
be  divided  into  two  classes;  (1)  those  in  which  it  is  provided  for  and 
agreed  to  be  paid,  in  the  contract;  (2)  debts  which  have  become  due 
and  remain  unpaid.  Contracts  containing  a  provision  for  the  payment 
of  interest  embrace  nearly  all  loans  made  in  the  ordinary  course  of 
business,  such  as  promissory  notes,  bonds,  etc.,  which  contain  such 
expressions  as  "with  interest"  or  "with  use"  and  either  naming  or 
omitting  the  rate;  all  such  expressions  in  a  contract  amount  to  an  abso- 
lute agreement  to  pay  interest,  either  at  the  legal  rate  or  the  rate 
si)ecified.  The  second  class  includes  notes  in  which  there  is  no  agree- 
ment to  pay  interest,  book  accounts,  and  debts  of  all  kinds,  however 
they  may  arise,  after  they  become  due.  If  a  man  has  money  in  his 
possession  belonging  to  another  which  is  legally  due,  and  he  neglects  to 
pay  it,  tlie  law  will  imply  a  promise  on  his  part  to  pay  interest  at  the 
legal  rate  for  the  time  during  which  the  money  is  thus  illegally  held. 
This,  however,  is  sometimes  held  not  to  be  interest,  strictly  speaking, 
but  damages  for  nonpayment  of  the  money  when  due,  which  the  law 
fixes  at  the  legal  rate.  This  distinction,  however,  is  not  important 
since  it  amounts  to  the  same  thing  whether  it  is  paid  as  interest  or 
as  damages. 

Usury  is  the  taking  of  more  interest  for  the  use  of  money  than  the 
law  allows.  In  order  to  be  usury  there  must,  therefore,  be  a  contract 
for  the  use  of  money,  which  may  be  by  a  loan  or  by  the  continuance  of 
an  existing  debt.  In  those  states  which  provide  a  maximum  rate  of 
interest  the  taking  of  more  than  this  maximum  rate  is  usury  within 
that  state;  but  since  this  maximum  rate  is  not  the  same  throughout  the 
country,  a  rate  is  often  usurious  in  one  state  and  legal  in  another. 
Where  no  maximum  rate  is  specified  by  law  any  rate  may  be  taken 
which  is  agreed  upon,  and  in  that  state  there  can  be  no  usury.  If  it 
can  be  shown  that,  as  a  matter  of  fact,  a  rate  higher  than  the  law 


'The  maximum  rate  is  six  per  cent,  in  the  following  states:  Delaware,  Ken- 
tucky, Maryland,  New  Hampshire,  New  Jersey,  New  York,  Pennsylvania,  Ten- 
nessee, Vermont,  Virginia,  and  West  Virginia.  Seven  per  cent,  in  Illinois.  Eight 
per  cent,  in  Alabama,  Georgia,  Indiana,  Iowa,  Louisiana,  Michigan,  Missouri,  North 
Carolina  and  Ohio.  Ten  per  cent,  in  Arkansas,  District  of  Columbia,  Florida,  Indian 
Territory,  Kansas,  Minnesota,  Missouri,  Nebraska,  Oregon,  South  Carolina,  and 
Texas.  Twelve  per  cent,  in  New  Mexico,  North  Dakota,  Oklahoma  Territory, 
South  Dakota,  Utah,  Washington,  and  Wyoming.    Eighteen  per  cent,  in  Idaho. 


INTEREST    AND    USURY.  85 

allows  is  taken  for  the  use  of  money,  it  matters  not  in  what  form  or 
under  what  pretense  it  is  done,  and  any  of  the  countless  devices  by 
which  an  illegal  rate  of  interest  is  sought  to  be  taken,  does  not  alter 
the  usurious  character  of  the  contract.  The  sale  of  any  security  like  a 
bond  or  note  which  is  a  valid  obligation  in  the  hands  of  the  seller,  like 
discounting  a  note  at  a  bank,  even  though  it  is  sold  for  less  than  its 
face  value,  is  not  usury,  since  this  is  not  considered  as  a  loan  of  money 
but  simply  a  sale  of  a  chattel.  A  sale  of  an  accommodation  note,  given 
for  the  express  purpose  of  being  thus  negotiated,  at  a  greater  discount 
than  the  maximum  rate,  is  usury,  since  this  is  simply  a  loan  of  money, 
as  is  also  the  discounting  of  one's  own  note  at  more  than  the  maximum 

rate. 

Compound  Interest  is  interest  on  interest,  and  this  cannot  be  col- 
lected unless  there  is  a  special  agreement  to  that  effect.  As  to  the 
collection  of  compound  interest  when  there  is  an  express  agreement  in 
advance  to  pay  it,  the  law  is  by  no  means  settled.  Some  courts  have 
held  that  such  agreements  are  void,  while  others  again  consider  them 
valid,  provided  the  rate  is  not  usurious.  In  loans  of  money  for  a  long 
time  it  is  very  common  to  make  in  addition  to  the  principal  note,  a 
number  of  interest  notes  or  coupons  which  represent  the  amount  of 
interest  that  is  to  be  paid  annually  or  semi-annually  according  to  the 
agreement,  and  it  is  stipulated  in  these  interest  notes  that  they  shall 
draw  interest  after  maturity.  This  is  in  effect,  an  agreement  to  pay 
compound  interest  but  such  agreements  would  probably  be  upheld  in 
nearly  all,  if  not  all,  the  states. 

Penalty  for  Usury. — Where  the  law  fixes  a  maximum  rate  above 
which  all  interest  is  usurious,  some  penalty  is  generally  imposed  upon 
the  lender  who  takes  usury.  There  is,  however,  but  little  regularity  in 
■  this  penalty  in  the  different  states.  Some  states  require  only  a  for- 
feiture of  the  interest  above  the  maximum  rate,*  while  in  others  all 
interest  is  forfeited,'  and  some  even  go  so  far  as  to  forfeit  both  principal 
and  interest'  Others  again  in  addition  to  these  penalties  subject  the 
lender  to  fine  and  imprisonment.'  The  lender  suffers  these  losses  in 
most  instances  because  the  law  will  not  assist  him  to  collect  his  claim. 
Ordinarily  if  the  obligation  has  been  paid  with  usurious  interest  the 

'  This  is  the  rule  in  North  Dakota  South  Dakota,  Georgia,  and  Louisiana. 

''This  is  true  in  Alabama,  District  of  Columbia,  Illinois,  Iowa,  Mississippi.  Mis- 
souri,  Nebraska,  New  Jersey,  North  Carolina,  Oklahoma  Territory,  South  Caro- 
lina, Texas,  Virginia,  and  Wisconsin. 

^  This  is  the  law  in  Arkansas,  Delaware,  Florida,  Minnesota,  and  New  York. 

*  Idaho  is  the  only  state  in  which  this  is  now  the  law. 


86  INTEREST   AND    USURY. 

borrower  cannot  recover  any  part  of  it,  but  in  some  states  the  law  will 
compel  the  lender  to  repay  the  usurious  interest.  The  student  should 
refer  to  the  statutes  of  his  own  state  for  the  legal  and  maximum  rates 
and  the  penalties  for  usury.'  Although  they  are  given  in  the  notes, 
they  change  so  often  that  some  of  them  are  likely  to  be  incorrect. 

QUESTIONS. 

Define  interest;  principal;  rate  per  cent.  What  is  meant  by  legal 
rate  ?  maximum  rate  ?  On  what  classes  of  claims  is  interest  allowed  ? 
Define  usury  ?  what  constitutes?  What  is  compound  interest?  What  is 
said  of  collecting  it  ?  What  is  said  of  the  effect  of  agreeing  to  take 
usury  ? 


'  In  the  following  states  the  penalty  for  usury  is  forfeiture  of  all  interest  above 
legal  rate,  but  it  will  be  noticed  that  in  most  of  them  the  legal  and  maximum  rates 
are  the  same:  Indiana,  Kentucky,  Maryland,  New  Hampshire,  New  Mexico,  Ohio, 
Pennsylvania,  Tennessee,  Vermont,  and  West  Virginia.  In  Idalio  in  addition  to 
fine  or  imprisonment  there  is  a  forfeiture  of  three  times  the  usury.  In  Kansas  the 
penalty  is  a  forfeiture  of  twice  the  usury.  In  Michigan  the  penalty  is  a  forfeiture 
of  all  interest,  and  lack  of  ability  to  sue  until  the  bill  is  due. 


OHAPT"ER  XIX. 


SALES  OF  PERSONAL  PROPERTY. 


GENERAL    PRINCIPLES. 


Property  is  the  produce  of  labor;  it  is  anything  of  value  which  is 
susceptible  of  ownership.  The  word  property,  however,  is  used  in  two 
different  senses;  to  indicate  (1)  the  thing  itself  which  the  person  owns, 
and  (2)  the  right  or  interest  which  a  person  has  in  a  thing  to  the  exclu- 
sion of  others;  as  for  example,  a  farm  is  said  to  be  property,  and  the 
right  one  has  in  the  farm  is  said  to  be  his  property  in  it.  The  latter  is 
the  legal  technical  definition  of  the  term,  while  the  former  is  the  popular 
understanding  of  it.  Property  is  divided  into  two  general  classes, 
personal  and  real. 

Personal  Property. — To  give  a  perfectly  logical  definition  of  per- 
sonal property  so  as  to  exactly  distinguish  between  it  and  real  property 
seems  to  be  impossible.  Personal  property  is  generally  said  to  consist 
of  such  things  as  are  movable  from  place  to  place,  as  merchandise,  live- 
stock, furniture,  etc.,  whereas  real  property  consists  of  those  things 
that  are  fixed  and  immovable,  such  as  lands,  houses,  etc.  Houses,  how- 
ever, are  frequently  movable,  but  are  nevertheless  generally  real  prop- 
erty. A  house  may  be  built  merely  as  a  temporary  building  with  the 
intention  of  moving  it,  or  any  house  may  be  sold  by  itself  and  taken  off 
the  land  on  which  it  is  built.  In  either  of  these  cases  it  is  per- 
sonal property.  Under  the  common  law  all  vegetable  growths  such  as 
trees,  grass,  and  growing  crops  while  attached  to  the  soil  were  consid- 
ered real  property,  but  the  moment  they  were  severed  from  the  soil 
they  became  personal  property.  Now  in  most  states  crops  growing 
from  seed  sown  or  planted  may  be  bought  and  sold  or  mortgaged  as 
personal  property. 

Sales. — A  sale  of  personal  property  may  be  regarded  in  two  ways: 
(1)  it  may  be  defined  as  the  transfer  of  the  title  in  the  thing  sold  for  a 
price  in  money;  or  (3)  it  may  be  considered  as  a  contract  or  agreement 
for  the  transfer  of  the  title  to  the  thing  sold  for  a  price  in  money. 
The  latter  is  the  sense  in  which  the  term  will  be  used  in  this  book. 

87 


88  SALES  OF  PERSONAL  PROPERTY. 

The  consideration  on  which  the  agreement  is  made  must  be  money, 
since  if  it  is  something  else  than  money  the  transfer  is  a  barter  and 
not  a  sale.  Sales  are  divided  into  two  general  classes,  executory  and 
executed. 

Executory  Sales  are  those  in  which  the  title  to  the  property  has  not 
been  transferred  from  the  seller  to  the  buyer;  there  is  simply  an  agree- 
ment to  make  a  transfer  of  it  at  some  future  time.  It  is  because  of  the 
importance  of  this  division  into  executory  and  executed  sales  that  we 
define  a  sale  as  an  agreement  to  transfer  the  title  rather  than  the  trans- 
fer itself.  If  a  sale  is  the  transfer  of  the  title  then  there  can  be  no  such 
thing  as  an  executory  sale.  If  a  drover  makes  a  bargain  for  ten  sheep 
out  of  a  flock  of  fifty  and  goes  away  without  selecting  them,  the  title 
to  the  sheep  has  not  been  transferred.  This  is  an  executory  sale.  Since 
the  sheep  do  not  yet  belong  to  the  buyer,  if  they  should  die  the  loss 
would  fall  upon  the  seller.  The  seller  may,  if  he  gets  an  opportunity, 
sell  the  whole  flock  to  someone  else  at  any  time  before  the  ten  are  se- 
lected, and  the  second  buyer  can  hold  them  against  the  first  purchaser, 
although  the  seller  can  be  compelled  to  pay  damages  for  refusing  to 
deliver  the  sheep,  if  any  damages  can  be  shown. 

Executed  Sales. — If  the  drover  when  he  buys  the  ten  sheep  desig- 
nates the  particular  sheep  that  he  wants,  by  marking  them  or  separating 
them  from  the  remainder  of  the  flock,  it  is  an  executed  sale.  By  this 
act  of  separation  or  marking,  the  title  to  these  particular  sheep  is 
transferred  and  they  become  the  absolute  property  of  the  buyer.  If 
they  are  left  in  the  care  of  the  seller  he  simply  keeps  them  for  the 
buyer,  and  if  they  die  the  loss  falls  upon  the  buyer.  So  also  if  the 
seller  sells  the  whole  flock,  including  these  marked  sheep,  to  some 
one  else  before  delivery,  the  drover  can  generally  claim  them  wherever 
he  finds  them.  Some  states,  however,  provide  by  statute  that  where 
property  is  left  in  the  hands  of  the  seller  it  is  evidence  of  fraud,  and  an 
innocent  subsequent  purchaser  can  hold  it,  although  the  first  buyer 
can  get  damages. 

Necessary  Conditions. — The  necessary  conditions  or  elements  of  a 
sale  of  personal  property  are  as  follows:  (1)  there  must  be  parties  com- 
petent to  contract;  (2)  these  parties  must  mutually  assent  to  the 
contract  in  the  same  sense;  (3)  there  must  be  a  consideration  or  price; 
(4)  there  must  be  subject  matter  or  thing  sold;  (5)  the  sale  must  con- 
form to  the  statute  of  frauds. 

Parties. — The  parties  to  a  contract  of  sale  are  the  buyer  and  the 
seller,  or  as  they  are  frequently  called,  the  vendor,  meaning  the  seller, 
and  the  vendee,  meaning  the  buyer.  These  parties  must  be  competent 
to  make  a  binding  contract.     The  rule  as  to  the  competency  of  parties 


I 


GENERAL    PRINCIPLES.  89 

is  the  same  in  sales  of  personal  property  as  in  any  other  contract.  The 
rule,  as  stated  in  the  preceding  chapter,  is  that  all  persons  "whom  the 
law  does  not  disqualify  are  competent  to  contract,  and  consequently 
may  be  parties  to  a  sale  of  personal  property.  The  parties  who  are  dis- 
qualified have  been  enumerated  and  discussed  in  a  preceding  chapter 
so  it  is  not  necessary  to  again  refer  to  them. 

Mutual  Assent. — This  condition  is  the  same  as  the  corresponding 
condition  in  an  ordinary  contract.  The  parties  must  assent  to  the 
terms  of  the  sale  with  the  same  understanding  of  them.  This  assent 
may,  of  course,  be  given  orally  or  in  writing,  and  may  be  either  express 
or  implied.  In  order  to  make  a  contract  of  sale,  however,  there  must 
be  a  definite  offer  to  sell  on  the  part  of  one  party,  and  a  definite  accept- 
ance of  the  offer  on  the  part  of  another.  Mere  negotiations  which  do 
not  constitute  a  distinct  offer  and  acceptance  will  not  be  considered 
a  sale. 

Price. — This  condition  corresponds  to  the  consideration  in  an  ordi- 
nary contract,  and  differs  from  it  only  in  that  it  must  be  money.  It 
may  either  be  paid  at  the  time  of  the  sale  or  promised  to  be  paid  at 
some  future  time.  The  price  may  be  either  express  or  implied.  If  the 
parties  distinctly  agree  upon  the  amount  to  be  paid,  there  is  an  express 
price.  Very  frequently,  however,  it  happens  that  no  price  is  fixed  upon 
at  the  time  of  the  sale  and  no  express  promise  to  pay  is  mentioned. 
Where  this  is  the  case,  if  there  is  anything  from  which  the  price 
intended  can  be  determined,  the  law  will  imply  a  promise  to  pay  it; 
for  example  where  the  subject  matter  of  the  sale  consists  of  articles  of 
merchandise,  the  law  will  imply  the  price  to  be  the  reasonable  market 
value  of  the  articles  on  the  day  of  sale.  If  there  is  nothing  from  which 
the  price  intended  can  be  determined  there  will  be  no  sale. 

Subject  Matter. — The  thing  sold,  or  the  subject  matter,  must  be 
legal  and  in  actual  or  potential  existence  at  the  time  of  the  sale.  There 
cannot  be  a  valid  contract  of  sale  where  the  subject  matter  has  ceased  to 
exist,  either  at  the  time  the  contract  is  made  or  at  the  time  when  it  is  to 
be  executed.  If  a  horse  sold  be  dead,  or  merchandise  sold  be  destroyed 
by  fire  or  otherwise  when  the  contract  is  made,  or  when  it  is  to  be 
executed,  there  is  no  sale,  even  though  the  price  be  paid.  But  where  a 
thing  is  in  potential  existence,  that  is,  may  come  into  existence  in  the 
future,  as,  for  example,  the  wool  to  grow  on  a  flock  of  sheep,  or  a 
growing  crop,  a  sale  may  be  made  of  it. 

liCgality. — The  subject  matter  of  the  contract  must  be  legal  in  order 
to  make  a  binding  contract  of  sale.  The  legality  of  the  subject  matter 
depends  on  the  same  rules  here  as  in  any  other  contract;  it  is  legal 
unless  the  law  declares  it  to  be  illegal,  and  a  sale  is  always  presumed  to 


90  SALES  OF  PERSONAL  PROPERTY. 

be  legal  until  its  illegality  is  shown.  At  common  law  the  sale  of 
articles  having  an  immoral  effect,  or  to  be  used  for  an  immoral  purpose, 
such  as  obscene  publications,  gambling  instruments,  etc.,  was  illegal, 
and  this  rule  still  prevails  in  all  the  states,  unless  it  has  been  expressly 
changed  by  a  statute.  In  all  the  states  the  statutes,  in  addition  to  this, 
expressly  provide  that  the  sale  of  other  articles  of  different  kinds  shall 
be  illegal,  except  under  certain  conditions.  For  example,  restrictions 
are  put  upon  the  sale  of  intoxicating  liquors  and  poisons  in  nearly  all 
the  states.  Whether  a  sale  is  illegal  or  not  is  determined  by  the  law  of 
the  place  where  it  is  to  be  performed. 

EflFect  of  Illegality. — An  illegal  sale  is  absolutely  void,  hence  there 
can  be  no  ratification  of  it.  If  a  sale  is  made  of  several  articles  for  one 
price,  and  part  of  them  are  legal  and  the  others  illegal,  the  whole  con- 
tract is  tainted  with  illegality,  and  no  money  can  be  recovered  for  any 
of  the  articles.  If  an  illegal  sale  has  been  executed  by  either  or  both 
parties,  the  law  will  not  relieve  either  party  from  its  effect.  If  the 
subject  matter  of  the  sale  has  been  delivered,  the  buyer  may  keep  it  and 
refuse  to  pay  the  price;  if  the  buyer  has  paid  the  price  but  the  subject 
matter  has  not  yet  been  delivered,  the  seller  may  refuse  to  deliver. 
This  is  because  of  the  general  rule  that  in  all  illegal  transactions  the 
law  leaves  the  parties  just  where  it  finds  them. 

Statute  of  Frauds. — Without  a  statutory  provision  to  that  effect  a 
contract  of  sale  of  personal  property  need  not  be  in  writing,  in  order  to 
be  valid;  but  as  we  have  seen,  the  Statute  of  Frauds,  as  adopted  in 
most  of  the  states,  provides  that  no  contract  for  the  sale  of  goods,  wares 
or  merchandise  for  the  price  of  fifty  dollars  or  upwards  is  binding, 
unless  (1)  the  buyer  shall  accept  part  of  the  goods  so  sold  and  actually 
receive  the  same,  or  (2)  pay  part  of  the  price  at  the  time  the  agreement  is 
made,  or  (3)  the  agreement  be  made  in  writing  and  signed  by  the  parties 
to  be  charged.  Wherever  this  statute  has  been  adopted  a  sale  of  per- 
sonal property  amounting  to  more  than  fifty  dollars,  which  does  not 
conform  to  one  of  these  conditions,  is  not  binding.  This  section  of  the 
statute  has  been  modified  in  some  of  the  states  by  changing  the  amount,' 
and  in  some  the  statute  has  not  been  enacted  at  all,''  so  that  in  them  a 
sale  of  personal  property  for  any  amount  is  binding,  without  compli- 
ance with  any  of  these  conditions. 

Application  of  the  Statute.— A  drover  bargains  with  a  farmer  for 
fifty  sheep  at  two  dollars  per  head.     There  is  no  sale  unless  the  drover 


'  See  note  to  page  39. 

s  This  section  of  the  statute  is  not  found  in  Alabama,  Arizona,  Delaware,  Ill- 
inois, and  Kansas. 


GENERAL    PRINCIPLES.  91 

takes  away  some  one  or  more  of  the  sheep,  or  pays  something  down,  or 
unless  a  written  memorandum  of  the  sale  is  made  and  properly  signed. 
No  formal  document  is  required;  a  simple  memorandum  like  the  fol- 
lowing is  sufficient : 

Brighton,  N.  Y.,  July  1,  1901. 

Bought  of  Glen  Kirig,  this  day,  his  flock  of  fifty  sheep  at  two  dollars 

per  head. 

^  CHARLES  ROBINSON,  . 

GLEN  KING. 

While  this  is  sufficient  to  comply  with  the  statute,  in  important  sales 
it  is  customary  to  execute  a  formal  bill  of  sale  like  the  following,  in 
order  that  the  buyer  may  have  something  to  show  his  title  to  the  prop- 
erty, and  also  require  that  the  seller  give  a  written  guarantee  that  he  has 
a  good  title. 

BILL   OF   SALE. 

^now  all  Pftt  iJa  thfSi^  i«$fntsi :  That  I,  Joseph  Stanton,  of  the 
county  of  Ottawa  and  State  of  Kansas,  party  of  the  first  part,  in  consid- 
eration of  the  sum  of  One  Hundred  Dollars  to  me  in  hand  paid  hy  Charles 
Bush,  of  the  county  of  Ottawa  and  state  of  Kansas,  party  of  the  second  party 
the  receipt  of  which  is  hei^ehy  acknoioledged,  have  bargained  and  sold,  and 
hij  these  presents  grant  and  convey  unto  the  said  party  of  the  second  part, 
all  of  the  following  described  personal  property,  to  wit :  all  my  flock  of 
fifty  sheep. 

®a  l^^ave  m&  U  ^oW  the  same  unto  the  said  party  of  the  second  part 
and  his  legal  representatives  forever. 

The  said  party  of  the  first  part  hereby  covenants  and  agrees  to  and  with 
the  said  party  of  the  second  part  that  he  is  possessed  of  the  full  right  and 
title  to  the  jJro^jerty  hereby  conveyed  and  that  he  loill  warrant  and  defend 
the  same  in  the  quiet  and  peaceful  possession  of  the  said  party  of  the  sec- 
o?idpart  against  the  laivful  claims  of  all  persoiis  lohomsoever. 

Ktt  ^ittteiSSi  U^JhctfOf,  /  have  hereunto  set  my  hand  this  first 

day  of  July  A.  D.  1901. 

JOSEPH   STANTON. 

If  both  the  buyer  and  seller  sign  the  agreement  either  can  enforce  it 
against  the  other;  if  only  one  signs,  he  alone  can  be  made  to  complete 
the  bargain. 

Transfer  of  Title. — It  is  often  important  to  know  whether  a  sale 
has  been  completed  in  order  to  determine  on  whom  the  loss  shall  fall  in 
case  of  a  destruction  of  the  property,  or  to  ascertain  whether  the  cred- 
itors of  the  buyer  or  the  seller  can  attach  or  levy  on  the  subject  matter 
of  the  sale  to  satisfy  their  claims.  Whether  or  not  the  title  to  the  prop- 
erty has  been  transferred  depends  primarily  on  the  intention  of  the  par- 


92  SALES  OF  PERSONAL  PROPERTY. 

ties.  If  the  circumstances  show  that  the  parties  intended  the  sale  to  be 
complete,  and  there  is  nothing  remaining  to  be  done  by  either  party  in 
completing  the  sale,  then  the  title  to  the  subject  matter  has  passed  to 
the  buyer.  If  anything  remains  to  be  done,  as  for  instance  the  seller  is 
to  deliver  the  sheep  to  the  drover  at  a  place  agreed  upon,  or  the  sheep 
are  to  be  selected,  or  weighed,  the  sale  is  not  completed  until  the  thing 
is  done.  It  is  presumed  in  such  cases  that  the  parties  intended  to  make 
the  transfer  of  the  title  depend  upon  the  performance  of  the  thing  yet 
to  be  done. 

Delivery. — The  term  delivery  is  used  to  denote  both  the  transfer  of 
title  and  the  transfer  of  possession.  Properly,  however,  the  word  only 
signifies  a  transfer  of  possession,  and  it  is  in  this  sense  that  it  is  here 
used.  Delivery  may  be  either  actual  or  constructive.  Actual  delivery 
is  simply  a  handing  over  of  the  goods  by  the  seller  to  the  buyer.  It 
sometimes  happens,  however,  that  the  goods  are  not  at  the  moment  in 
the  buyer's  possession;  they  may  be  in  a  warehouse,  in  the  hands  of  a 
common  carrier,  or  they  may  be  too  bulky  to  be  handled  readily;  in 
such  cases  a  delivery  of  a  bill  of  lading,  or  the  key  to  the  warehouse,  or 
anything  representing  the  property  is  sufficient.  This  kind  of  delivery 
where  the  goods  are  not  actually  handled  by  the  joarties  is  called  a  con- 
structive delivery. 

Stoppage  in  Transitu  is  a  right  to  control  goods  that  under  certain 
circumstances  can  be  exercised  by  the  seller  before  there  has  been  a  de- 
livery to  the  buyer.  It  is  the  right  to  regain  possession  of  goods  that 
have  been  forwarded  to  the  buyer  on  credit,  and  then  to  hold  possession 
of  them  until  the  price  has  been  paid.  The  right  may  be  exercised  by 
the  seller  provided  the  following  conditions  exist:  (1)  The  price  for 
which  the  goods  were  sold  must  be  wholly  or  partly  unpaid;  (2)  they 
must  be  in  the  hands  of  a  third  person  in  transit;  and  (3)  the  buyer 
must  be  insolvent. 

Indebtedness. — The  sole  use  of  the  right  of  stoppage  in  transitu  is 
to  enforce  payment,  consequently  payment  for  goods  necessarily  pre- 
vents its  exercise;  but  the  mere  taking  of  a  note  in  payment  does  not 
affect  the  right,  unless,  by  agreement  between  the  parties,  the  note  is 
accepted  as  absolute  payment.  Although  the  price  may  be  partially 
paid,  the  goods  may  be  stopped  in  protection  of  the  part  which  remains 
unpaid.  The  indebtedness  must  be  on  the  particular  goods  which  are 
stopi>ed.  Any  general  indebtedness  of  the  buyer  to  the  seller  will  not 
allow  the  stoppage  of  goods  which  are  paid  for. 

In  Transit. — The  second  condition  is  that  the  goods  must  be  in 
transit  from  the  seller  to  the  buyer.  This  of  course  implies  that  they 
have  left  the  possession  of  the  seller  and  have  not  yet  come  into  the 


aENERAL   PRINCIPLES.  93 

possession  of  the  buyer,  so  they  are  necessarily  in  the  possession  of  a 
third  person  for  the  purpose  of  being  transported  to  the  buyer.  There 
must  not  have  been  either  an  actual  or  constructive  delivery  to  the 
buyer.  If  this  possession  is  not  for  the  purpose  of  conveyance,  but  the 
third  person  simply  holds  them  for  safe  custody  as  agent  of  the  buyer, 
and  at  the  buyer's  disposal,  then  the  right  of  stoppage  in  transitu  is 
lost.  It  is  not  necessary,  however,  that  the  third  person  be  actually 
carrying  the  goods  at  the  time  they  are  stopped;  they  may  be  in  the 
carrier's  warehouse  awaiting  transportation,  or  they  may  have  been 
carried  and  be  then  awaiting  delivery  to  the  buyer.  So  long  as 
they  have  not  left  the  possession  of  the  third  person,  the  right  may  be 
exercised. 

Insolvency  of  the  Buyer. — This  must  have  occurred  or  the  seller 
have  discovered  it  after  the  sale.  If  the  insolvency  occurred  and  is 
known  to  the  seller  before  he  ships  the  goods  he  cannot  exercise  the 
right  of  stoppage  in  transitu.  By  insolvency  is  here  meant,  not  neces- 
sarily a  technical  case  of  bankruptcy  or  insolvency,  i.  e.,  that  the  buyer 
has  taken  advantage  of  the  bankrupt  law  or  made  an  assignment  for  the 
benefit  of  his  creditors;  it  will  justify  the  right  of  stoppage  if  the  seller 
can  show  general  inability  on  the  part  of  the  buyer  to  pay  his  debts.  The 
seller,  however,  exercises  this  right  at  his  own  peril;  if  the  seller  stop 
the  goods  when  the  buyer  is  solvent,  he  can  be  compelled  to  deliver 
them,  and  will  also  be  liable  to  the  buyer  for  all  damage  which  may 
have  resulted  from  the  stoppage,  witliout  regard  to  whether  the  seller 
actually  believed  the  buyer  to  be  insolvent  or  not. 

Exercise  of  the  Right. — It  is  not  necessary  for  the  seller  to  take 
actual  possession  of  the  thing  sold  when  in  the  hands  of  a  carrier  or 
middleman.  It  is  sufficient  for  him  to  give  notice  to  the  common  car- 
rier to  hold  the  goods  subject  to  his  order.  The  notice  should  describe 
the  goods,  state  that  the  right  of  stoppage  in  transitu  exists,  and  order 
the  carrier  not  to  deliver  them  to  the  consignee.  For  example,  a  boot 
and  shoe  manufacturer  in  Rochester  ships  to  a  dealer  in  Chicago  by  the 
American  Express  Company,  a  case  of  shoes;  the  next  morning  he  dis- 
covers by  his  daily  commercial  report  that  the  dealer  has  failed.  He 
delivers  immediately  to  the  agent  of  the  express  company  in  Eochester 
a  notice  like  the  following: 

NOTICE  OP  STOPPAGE   IN  TRANSITU. 

Rochester,  N.  Y.,  July  1,  1901. 
To  the  American  Express  Company  : 

Gentlemen, — /  delivered  to  you  yesterday  one  case  of  shoes  consigned  to 
Samuel  C.  Hasson,  Chicago,  III.     Circuvnstances  are  such  that  I  have  the 


94  SALES  OF  PERSONAL  PROPERTY. 

right  of  stoppage  in  transitu.     Do  not,  therefore,  deliver  the  case  of  shoes, 
hut  hold  the  same  subject  to  my  order. 

Yours  respectfully, 

WILLIAM  A.   STERNBERG. 

He  may  send  this  by  mail,  but  in  that  case  he  might  have  to  prove 
that  it  was  actually  received,  and  would  find  it  difficult  to  do  so,  con- 
sequently it  is  best  to  have  it  delivered  personally  to  the  express  agent. 
If  the  company  delivers  the  case  of  shoes  after  receiving  this  notice  it 
is  liable  for  whatever  loss  the  shipper  may  sustain  by  such  unauthorized 
delivery. 

Auction  Sales  are  sales  in  which  the  property  is  offered  to  the  person 
who  is  willing  to  give  the  most  for  it.  The  two  necessary  elements  are 
that  the  sale  be  public,  that  is,  (1)  open  to  anyone  to  become  a  bidder, 
and  (2)  competition  between  the  bidders.  The  object  of  the  auction  sale 
being  to  secure  the  highest  price  for  the  goods,  it  is  a  necessary  condi- 
tion that  the  competition  of  the  bidders  be  open  and  fair.  The  employ- 
ment of  i^ersons  by  the  seller,  called  by-bidders,  to  bid  for  him  simply 
to  run  up  the  price  of  the  goods,  with  the  understanding  that  they  are 
not  to  be  bound  by  their  bids,  makes  the  sale  voidable  at  the  option  of 
the  buyer.  Also  a  combination  among  bidders  whereby  a  part  are  to 
abstain  from  bidding,  allowing  one  to  buy  the  property  cheaply,  is  a 
fraud  on  the  seller  and  makes  the  sale  voidable  as  to  him.  An  owner 
has  a  perfect  right  to  bid  on  the  property  if  it  is  done  openly  and  fairly, 
unless  the  sale  is  made  expressly  without  reserve. 

Fraudiileut  Sales. — Property  is  sometimes  disposed  of,  by  persons 
who  are  badly  involved  in  debt,  in  such  a  way  as  to  keep  it  out  of  the 
hands  of  their  creditors  and  save  to  themselves  the  use  and  profits  of  it. 
Sales  of  this  kind  are  binding  between  the  parties  themselves,  but  under 
certain  circumstances  can  be  set  aside  by  the  creditors.  If  the  consid- 
eration is  not  a  valuable  one,  or  if  it  is  valuable,  but  the  buyer  knows 
that  the  sale  is  to  defraud  creditors,  it  can  be  set  aside  unless  the  debtor 
retains  property  enough  to  pay  his  debts.  In  some  states  it  is  provided 
by  statute  that  all  sales  in  which  the  possession  of  the  property  is  re- 
tained by  the  seller,  unless  a  written  bill  of  sale  is  given  and  recorded, 
shall  be  considered  fraudulent,  whether  they  are  actually  so  or  not,  and 
that  subsequent  purchasers  without  notice  of  the  prior  sale  can  hold  the 
property. 

QUESTIONS. 

Define  property;  in  what  senses  is  the  word  used?  Define  personal 
property.  What  does  it  include?  What  is  a  sale  of  personal  property? 
What  is  an  executory  sale?  executed?  give  examples.     What  are  the 


GENERAL   PRINCIPLES.  95 

necessary  conditions  of  a  sale  of  personal  property?  AVhat  is  said  of  the 
parties?  assent?  price?  subject  matter?  legality  of  subject  matter? 
illegality?  What  connection  has  the  statute  of  frauds  with  sales  of  per- 
sonal property?  give  example  of  its  application.  Upon  what  does  the 
transfer  of  title  depend?  Why  is  it  important  to  know  when  the  title 
has  been  transferred  ?  In  what  senses  is  the  term  delivery  used?  Define 
.actual  delivery;  constructive;  give  examples.  What  is  the  right  of 
stoppage  in  transitu?  Under  what  circumstances  may  it  be  exercised? 
What  is  necessary  with  regard  to  the  indebtedness  of  the  buyer?  with 
regard  to  the  goods  being  in  transit?  insolvency  of  the  buyer?  How  is 
the  right  exercised?  What  are  auction  sales?  What  are  the  nesessary 
elements?  What  kinds  of  sales  are  fraudulent?  What  is  their  effect? 
What  statutory  provisions  are  found  in  some  states  regarding  fraudulent 
sales?    Is  there  such  a  provision  in  this  state? 


CHAPTEE  XX. 


SALES   OF   PERSONAL   PROPERTY. 


WARRANTY. 


Warranty,  in  a  sale  of  personal  property,  is  a  contract  on  the  part  of 
tne  seller  to  be  responsible  for  all  damage  if  the  property  is  not  as  rep- 
resented and  described.  A  warranty,  being  a  contract,  must  of  course 
be  supported  by  a  consideration.  If  it  is  made  at  the  same  time  as  the 
sale,  or  at  some  time  prior  to  the  sale,  provided  it  operated  as  an 
inducement  to  make  the  purchase,  the  price  of  the  goods  will  be  a  con- 
sideration for  both  the  warranty  and  the  contract  to  sell.  If  made 
after  and  as  no  part  of  the  sale,  it  requires  a  new  and  independent  con- 
sideration, but  any  slight  though  material  consideration  will  be  suffi- 
cient. With  reference  to  the  way  in  which  they  are  made  there  are 
two  principal  sub-divisions  of  warranty,  express  and  implied.  With 
reference  to  the  subject  of  the  warranty  there  are  also  two  kinds,  war- 
ranty of  title  and  warranty  of  quality.  Either  of  these  may  be  express 
or  implied. 

Express  Warranty  is  a  warranty  expressly  made  by  the  seller.  It 
may  relate  to  any  fact  about  the  thing  sold,  the  truth  of  which  is 
unknown  to  the  buyer ;  and  it  is  not  necessary  that  the  seller  use  the 
word  warrant.  During  negotiations  for  the  sale  of  a  horse,  if  the 
seller  says  he  is  sound,  and  relates  that  fact  to  assure  you  of  its  truth 
and  induce  you  to  purchase,  and  you  rely  on  the  statement,  it  is  an 
express  warranty,  and  if  the  horse  is  unsound  in  any  particular  the 
seller  is  liable  for  a  breach  of  warranty.  But  a  seller  may  express 
opinions  of  his  property  of  a  favorable  nature  and  in  commendation  of 
it,  which  will  not  amount  to  warranty  ;  as  where  an  agent  for  a -har- 
vesting machine  says  that  it  is  the  best  machine  made,  everybody 
understands  this  to  be  merely  the  expression  of  an  opinion  and  it  is  not 
considered  a  warranty. 

Implied  Warranty  is  a  warranty  not  expressed  by  the  seller  in  so 
many  words  but  implied  from  circumstances.  An  implied  warranty  on 
a  particular  point  only  arises  when  there  is  no  express  warranty  on  the 

96 


i 


WARRANTY.  97 

same  point.  If  the  seller  expressly  warrants  his  goods  to  possess  cer- 
tain qualities,  no  implied  warranty  can  go  any  farther  than  this.  An 
express  warranty,  however,  relating  to  a  quality,  will  not  exclude  an 
implied  warranty  of  title,  and  vice  versa. 

Warranty  of  Title  is  a  warranty  on  the  part  of  the  seller  that  he  is 
the  owner  of  and  has  the  right  to  sell  the  property.  As  we  have  seen 
this  may  be  either  express  or  implied,  but  in  sales  of  personal  property 
a  warranty  of  title  is  not  generally  expressed,  unless  a  formal  bill  of 
sale  is  given  to  the  buyer  by  the  seller.  In  bills  of  sale  there  is  usually 
a  warranty  on  the  part  of  the  seller,  stated  in  and  made  a  part  of  the 
contract,  that  he  owns  and  has  the  right  to  sell  the  property.  Where 
the  contract  of  sale  is  in  writing,  the  warranty  must  also  be  written  if 
it  is  made  at  the  same  time,  since  the  terms  of  a  written  contract  can- 
not be  modified  by  an  oral  agreement  made  at  the  same  time  with  it. 
If,  however,  the  warranty  is  made  subsequent  to  the  contract,  and  for 
a  new  consideration,  it  may  then  be  oral  whether  the  contract  of  sale 
was  written  or  not. 

Implied  Warranty  of  Title. — A  sale  of  personal  property  implies 
an  affirmation  on  the  part  of  the  seller  that  the  property  is  his,  and 
therefore  he  warrants  the  title,  unless  it  is  shown  by  facts  and  circum- 
stances that  he  did  not  intend  to  assert  absolute  ownership  but  to 
transfer  only  such  rights  as  he  has.  If  the  seller  expressly  asserts  that 
he  does  not  warrant  the  title,  of  course  there  can  be  no  implied  war- 
ranty of  title,  but  in  the  absence  of  such  express  denial  it  is  not  very 
definitely  settled  just  what  circumstances  will  indicate  an  absence  of 
such  intention.  Where  a  person  in  the  capacity  of  sheriff  or  constable 
sells  the  property  under  an  execution,  there  can  be  no  implied  warranty; 
also  where  the  goods  sold  are  in  the  possession  of  and  claimed  by  other 
than  the  seller,  there  would  seem  to  be  no  implied  warranty. 

Warranty  of  Quality. — This  may  be  an  undertaking  on  the  part  of 
the  seller  that  the  goods  possess  some  particular  quality  or  are  fit  for 
some  particular  purpose,  in  which  case  it  is  a  special  warranty  ;  or  it 
may  be  simply  a  statement  that  the  goods  are  free  from  unsoundness  or 
defects,  in  which  case  it  is  a  general  warranty  ;  the  warranty  of  quality 
may  be  either  express  or  implied.  It  is  an  express  warranty  when 
there  is  a  positive  statement  on  the  part  of  the  seller  that  the  goods  are 
of  a  certain  quality,  made  with  the  intention  and  effect  of  inducing  the 
purchaser  to  buy. 

Caveat  Emptor  is  a  commonly  used  latin  phrase  which  expresses  a 
legal  maxim.     It  means  "let  the  purchaser  beware,"  and  applies  to  a 
case  in  which  the  thing  sold  is  before  the  buyer  and  he  has  an  oppor- 
tunity of  examining  it.     Whenever  the  buyer  has  an  equal  opportunity 
7 


98  SALES   OF    PERSONAL    I'KOPERTY. 

with  the  seller  to  examine  the  goods,  he  is  bound  to  use  diligence  to 
discover  defects  or  else  require  an  express  warranty  of  the  seller.  If 
he  does  not  require  an  express  warranty  he  takes  the  risk  of  quality 
upon  himself,  and  must  hear  the  loss,  unless  he  can  show  that  deceit 
was  used  to  conceal  defects  or  delude  him. 

Implied  Warranty  of  Quality  is  a  warranty  which  the  law  implies 
as  to  the  merchantable  quality  of  a  thing  sold  when  it  is  not  submitted 
to  the  buyer,  or  if  it  naturally  is  not  subject  to  inspection.     Where  a 
thing  is  made  or  supplied  upon  the  order  of  the  buyer,  there  is  an 
implied  warranty  that  it  is  reasonably  fit  for  the  purpose  for  which  it 
is  ordinarily  used,  or  fit  for  the  specific  purpose  of  the  buyer,  if  he  com- 
municates that  purpose  at  the  time  he  gives  his  order.     If  I  step  into 
a  shoe  store  and  ask  for  a  pair  of  walking  shoes,  and  a  pair  is  selected 
by  the  dealer  to  whose  judgment  I  trust,  there  is  an  imj)lied  warranty 
that  they  are  reasonably  fit  for  walking.     In  a  sale  of  goods  by  descrip- 
tion where  the  buyer  has  made  no  inspection,  there  is  also  an  implied 
warranty  that  the  goods  when  delivered  will  correspond  to  the  descrip- 
tion of  them,  in  reliance  upon  which  the  sale  was  made.    And  whenever 
articles  of  food  are  sold  to  a  consumer  by  one  who  deals  in  them,  there 
is  an  implied  warranty  that  they  are  wholesome  and  fit  for  consumption. 
Sales  by  Sample. — When  a  sale  is  made  of  goods  by  means  of  the 
exhibition  of  a  sample  instead  of  the  bulk  of  the  goods,  there  is  a  nec- 
essary implication  that  the  goods  will  be  equal  to  the  sample  in  quality  ; 
but  the  implied  warranty  only  amounts  to  an  assurance  that  the  bulk 
corresponds  to  the  sample  in  kind  and  quality.     There  is  no  implied 
warranty  against  latent  defects  in  goods  which  are  present  in  both 
sample  and  bulk.     However,  in  order  that  an  implied  warranty  may  be 
claimed,  that  the  bulk  is  equal  to  the  sample,  it  must  actually  be  a  sale 
made  by  sample.     Exhibiting  the  sample  is  not  sufiicient.     It  must  be 
exhibited  with  the  intention  and  understanding  of  the  parties  that  the 
sample  is  a  reliable  representation  of  the  goods,  and  that  the  buyer 
may  determine  the   quality  of  the  goods  by  an  examination  of  the 
sample. 

Breach  of  "Warranty. — Where  the  goods  sold  are  not  as  they  have 
been  w^arranted  to  be  by  tlie  seller,  there  is  said  to  be  a  breach  of  war- 
ranty. The  w^arranty  being  a  contract  on  the  part  of  the  seller,  he  is 
held  responsible  for  its  breach,  and  there  are  two  ways  in  which  the 
buyer  may  get  satisfaction.  If  the  sale  is  by  sample  and  the  warranty 
is  broken  by  the  failure  of  the  goods  to  correspond  to  the  sample, 
the  buyer  may  refuse  to  accept  them,  provided  the  breach  is  discovered 
at  the  time  or  before  the  goods  are  delivered.  If  the  breach  cannot  be 
discovered  until  some  time  after  the  goods  are  delivered,  whether  the 


WARRANTY.  99 

warranty  is  a  sale  by  sample  or  otherwise,  the  only  remedy  would  seem 
to  be  to  sue  the  seller  for  damages  for  the  breach,  or  set  up  the  damages 
as  a  counter-claim  against  the  seller  in  an  action  for  the  price. 

QUESTIONS. 

Define  warranty.  What  is  said  of  the  consideration  ?  What  kinds 
of  warranty  are  there  ?  Define  express  warranty  ;  implied  warranty. 
What  is  warranty  of  title  ?  In  what  ways  may  it  be  made  ?  What  is 
implied  warranty  of  title  ?  When  is  such  warranty  implied  ?  What 
is  warranty  of  quality  ;  special ;  general.  What  is  the  meaning  of  the 
term  caveat  emptor  ?  when  does  it  apply  ?  When  is  there  an  implied 
Warranty  of  quality  ?  What  constitutes  a  sale  by  sample  ?  What 
implied  warranty  is  there  in  such  sales  ?  What  is  a  breach  of  warranty? 
What  is  the  remedy  ?  » 


CHAPTER  XXI. 


SALES  OF   PERSONAL   PROPERTY. 


CONDITIONAL   SALES. 


Conditional  Sales  are  tliose  in  whicli  the  title  to  property  is  vested, 
modified,  or  defeated,  upon  the  happening  of  some  event.  If  the 
seller  is  to  give  a  title  to  the  goods  on  the  happening  of  the  event  and 
not  before,  it  is  called  a  condition  precedent;  if  the  effect  of  the 
happening  of  the  event  is  to  defeat  the  title,  it  is  called  a  condition 
subsequent;  for  example,  A  buys  a  piano  of  B  and  agrees  to  pay  for  it 
in  monthly  installments  of  twenty-five  dollars  each;  he  gives  his  note 
for  five  hundred  dollars,  payable  in  monthly  installments,  and  in  that 
note  agrees  that  the  title  to  the  piano  is  to  remain  with  B,  until  the  pay- 
ment of  the  last  installment,  when  it  is  to  be  transferred  to  A.  This  is 
a  condition  precedent,  because  the  performance  of  the  condition,  that 
is  the  payment  of  the  last  installment,  vests  the  title  in  the  buyer.  If 
a  person  takes  his  watch  to  a  pawn-broker  and  sells  it  to  him  under  an 
agreement  that  he  can  buy  it  back  within  a  certain  time,  this  is  a  con- 
dition subsequent,  since  the  performance  of  the  condition,  that  is  the 
redemption  of  the  watch,  destroys  the  buyers  title.  The  most  common 
conditional  sales,  in  addition  to  those  already  mentioned,  are  sales  on 
trial,  sales  by  sample,  sales  on  condition  that  the  goods  arrive  at  a  cer- 
tain place,  and  chattel  mortgages. 

Sales  on  Trial  are  sales  in  which,  by  the  terms  of  the  bargain,  the 
purchaser  is  to  have  possession  of  the  thing  sold  for  the  purpose  of 
trying  it.  It  is  sometimes  called  a  sale  on  approval.  The  condition 
is  that  the  property  is  to  be  found  satisfactory.  The  buyer  is  bound 
to  try  the  article  within  the  time  specified,  and  if  no  time  is  speci- 
fied, then  within  a  reasonable  time.  If  the  trial  naturally  involves 
an  injury  to  or  consumption  of  the  article  tried,  the  loss,  if  any,  falls 
upon  the  seller,  provided  it  is  no  greater  than  is  necessary  for  the  trial. 
The  buyer  has  the  whole  time  within  which  to  make  up  his  mind,  and 
the  sale  does  not  become  absolute  until  he  has  expressed  his  approval. 
If  he  does  not  approve  the  property  he  must  return  it  or  inform  the 

100 


CONDITIONAL   SALES.  101 

seller.  If  he  does  not  return  it  within  the  agreed  time,  or  within  a 
reasonable  time  in  case  no  time  is  specified,  then  the  law  will  imply 
that  he  approves  it,  and  the  sale  is  absolute. 

Sales  by  Sample  have  already  been  discussed  under  the  head  of 
warranty,  and  it  is  sufficient  to  say  here  that  such  sales  are  regarded 
both  as  sales  under  warranty  and  conditional  sales;  it  is  a  condition 
precedent  as  well  as  a  warranty  that  the  goods  correspond  to  the  sample, 
and  if  they  do  not  the  buyer  need  not  complete  tlie  sale  by  accepting 
the  goods. 

Goods  to  Arrive. — This  is  a  sale  of  merchandise  expected  from 
abroad  before  the  vessel  conveying  it  has  arrived.  The  condition  is, 
that  the  merchandise  shall  arrive  as  expected;  if  the  goods  do  not 
arrive,  then  there  is  no  sale,  since  the  condition  on  Avhich  the  title  is 
vested  in  the  buyer  has  not  been  performed.  There  may  be,  however, 
an  absolute  sale  of  goods  not  yet  arrived.  If  the  seller  delivers  a  bill  of 
lading  of  the  property  to  the  buyer  this  will  indicate  an  intention  on 
the  jjart  of  the  parties  to  transfer  the  title,  unless  there  is  an  express 
agreement  to  the  contrary,  and  if  the  goods  do  not  arrive  it  is  the 
buyer's  loss. 

Chattel  Mortgages  are  conditional  sales  in  which  the  payment  of  a 
certain  debt  or  the  performance  of  a  certain  obligation  defeats  the 
buyer's  title.  As  between  the  parties  themselves  a  chattel  mortgage 
may  be  made  orally  or  in  writing;  but  the  statutes  of  most  of  the  states 
provide  that  where  possession  of  the  property  is  retained  by  the  mort- 
gageor,  a  mortgage  will  be  binding  against  subsequent  purchasers  with- 
out notice  of  its.  existence,  and  the  creditors  of  the  mortgageor,  only 
when  the  mortgage  is  in  writing  and  recorded  in  the  office  of  the 
county  recorder,  county  clerk,  or  register  of  deeds.  Wliere  nothing  is 
said  about  it  in  the  mortgage,  the  mortgagee  is  entitled  to  the  posses- 
sion of  the  property;  but  it  is  usual  to  insert  a  clause  saying  that  except 
on  certain  conditions,  the  property  is  to  remain  in  the  possession  of  the 
mortgageor.  In  such  cases  the  mortgagee  is  entitled  to  possession  of  the 
property  only  on  the  specified  conditions.  These  conditions  are  various. 
The  mortgage,  of  course,  always  j)rovides  that  the  mortgagee  may  take 
possession  in  case  the  mortgageor  fails  to  pay  the  debt  or  perform  the 
obligation  which  the  mortgage  is  given  to  secure.  He  may  be  allowed 
to  take  possession  whenever  he  deems  the  security  unsafe;  in  fact  his 
right  to  take  possession  of  the  property  may  be  made  to  depend  on  the 
happening  of  any  event. 

Form  of  Mortgage. — As  we  have  seen,  a  mortgage  made  orally  will 
be  binding  between  the  parties  themselves,  but  on  account  of  the  greater 
certainty  thereby  secured  they  are  nearly  always  written.     Some  states 


103  SALES   OF   PERSONAL   PROPERTY. 

l")rovide  by  statute  that  mortgages  must  be  written.  No  particular  for- 
mality in  the  writing  is  required  but  certain  conditions  must  be  com- 
plied with.  In  the  first  place  the  property  must  be  described  in  such  a 
way  that  it  can  be  identified.  The  description  ought  to  be  such  that  a 
stranger  with  nothing  but  the  mortgage  to  refer  to  can  pick  out  the 
property  covered  by  it.  This  degree  of  perfection  is,  of  course,  in  most 
cases  impossible,  but  as  near  an  approach  to  it  as  possible  should  be 
aimed  at.  If  the  description  is  not  sufficiently  accurate  to  enable  the 
goods  to  be  identified  by  the  aid  of  parol  testimony,  then  the  mortgage 
is  invalid.  The  debt,  also,  for  which  the  mortgage  is  given,  should  be 
so  described  as  to  distinguish  it  clearly  from  all  other  obligations.  The 
mortgage  should  of  course,  contain  the  names  of  the  parties,  the  con- 
ditions on  which  it  will  become  an  absolute  conveyance,  and  be  prop- 
erly signed  by  the  mortgageor,  and  delivered  to  and  accepted  by  the 
mortgagee.     The  following  is  a  short  form  of 

CHATTEL  MORTGAGE. 

^ttow  all  Pen  by  tlxtu  ^ttmit^ :  That  I,  Joseph  Stanton,  of  the 
cotinty  of  Ottaiva  and  State  of  Kansas,  party  of  the  first  part,  in  consider- 
ation of  the  sum  of  One  Hundred  Dollars  to  me  in  hand  paid  by  Charles 
Bush,  of  the  county  of  Ottaioa  and  State  of  Kansas,  party  of  the  second 
part,  the  receipt  of  which  is  hereby  acknoivledged,  have  bargained  and 
sold,  and  by  these  presents  grant  and  convey  unto  the  said  ])arty  of  the 
second  pdrt,  all  of  the  following  described  personal  property,  to  wit :  all 
myfock  of  fifty  sheep. 

SUct  ^avc  mH  U  '^olA  the  same  utito  the  said  party  of  the  second  part 
and  his  legal  representatives  forever. 

The  said  party  of  the  first  ptart  hereby  covenants  and  agrees  to  and  with 
the  said  party  of  the  second  part  that  he  is  possessed  of  the  fall  right  a)id 
title  to  the  property  hereby  conveyed  and  that  he  will  warrant  and  defend 
the  same  in  the  quiet  and  peaceful  possession  of  the  said  party  of  the 
secotid  part  against  the  laiuful  claims  of  all  persons  tvhomsoever. 

^voviAtA  ^Iwaysi,  aiid  these  jjresents  are  upon  the  following  conditions, 
to  wit : 

1.   TJie  said  party  of  the  first  part  has  this  day  executed  and  delivered 
to  said  second  party  his  certain  promissory  note  of  which  the  following  is 
a  copy : 
$100,00.  Bennington,  Kansas,  July  1,  1901. 

One  year  after  date  I  promise  to  pay  to  the  order  of  Charles  Bush,  One 
hundred  Dollars,  with  interest  from,  date  at  10  per  cent,  per  annum. 

JOSEPH  STANTON. 


CONDITIONAL   SALES.  103 

Nolo  if  the  said  first  party  shall  well  and  truly  pay  or  cause  to  he  paid, 
said  sum  of  money  i)i  said  note  specified,  loith  the  interest  thereon,  ivhen 
the  same  shall  become  due  and  payable,  then  this  conveyance  shall  be  void. 
But  if  the  said  first  party  shall  fail  to  pay  or  cause  to  be  paid,  said  sum 
of  money  in  said  note  specified,  with  the  interest  thereon  or  any  part  thereof, 
when  the  same  shall  become  due  and  payable,  then  and  in  either  of  these 
cases  this  conveyance  shall  become  absolute,  and  said  second  party  shall  be 
entitled  to  the  possession  of  the  property  hereby  conveyed. 

2.  It  is  agreed  by  tlte  parties  hereto  that  the  property  hereby  conveyed 
shall  remain  in  the  possession  of  the  party  of  the  first  part  until  default 
is  made  in  the  p)ayme7it  of  said  note. 

Ktt  Witttei8l|S  ^lufeof,  /  have  hereunto  set  my  hand  this  first 

day  of  July  A.  D.  1901. 

JOSEPH  STANTON. 

Recording-. — The  law  regarding  the  recording  of  cliattel  mortgages 
depends  upon  the  statutes  of  the  different  states,  consequently  reference 
must  be  had  to  them  in  order  to  determine  exactly  what  is  required. 
However,  the  statutes  of  nearly  all  the  states  require  that  where  prop- 
erty is  retained  in  the  possession  of  the  mortgageor,  the  mortgage  must 
be  recorded  in  order  to  be  binding  against  subsequent  purchasers  and 
the  creditors  of  the  mortgageor.  The  object  of  recording  is,  of  course, 
to  give  public  notice  of  the  existence  of  the  mortgage  to  would-be  pur- 
chasers of  the  property.  If  the  mortgage  is  duly  recorded,  this  is  con- 
sidered in  law  as  being  notice  to  everyone  of  its  existence,  whether  they 
have  actual  notice  of  it  or  not.  Since  the  sole  object  of  recording  is  to 
give  notice  to  the  public,  if  it  can  be  shown  that  subsequent  purchasers 
of  the  property  actually  knew  of  its  existence,  it  will  be  binding  against 
them  without  being  recorded. 

Foreclosure  of  the  mortgage  is  taking  possession  of  the  property 
because  of  the  failure  of  the  mortgageor  to  perform  the  obligation  which 
the  mortgage  was  given  to  secure.  This  also  is  regulated  almost 
entirely  by  statute  in  the  different  states.  Some  states  provide  that 
after  foreclosure  of  the  mortgage  the  mortgageor  shall  have  a  certain 
time  in  which  to  redeem  his  property.  Generally,  however,  the  mort- 
gageor has  a  right  to  redeem  at  any  time  prior  to  the  sale  of  the  prop- 
erty to  satisfy  the  mortgage,  but  not  afterwards.  In  most  states  all 
that  is  necessary  to  foreclose  a  chattel  mortgage  is  for  the  mortgagee  to 
take  possession  of  the  property.  If  the  possession  is  not  given  volun- 
tarily by  the  mortgageor  the  mortgagee  can  bring  a  suit,  and  possession 
will  be  given  by  an  officer.  After  securing  possession  he  is  usually 
required  to  give  public  notice  and  sell  the  property  at  auction.     In  the 


104  SALES   OF    PEKSONAL   PKOPERTY. 

absence  of  statutory  requirements,  however,  he  may  dispose  of  the  prop- 
erty in  any  way  he  pleases,  having,  of  course,  proper  regard  for  the 
interests  of  the  mortgageor  in  securing  a  good  price. 

QUESTIONS. 

What  are  conditional  sales  ?  Define  condition  precedent;  subsequent: 
give  examples.  What  are  the  principal  kinds  of  conditional  sales  ? 
Define  sales  on  trial.  AVhat  are  the  duties  of  the  buyer  ?  What  are  sales 
by  sample  ?  What  is  the  condition  ?  What  is  the  condition  in  a  sale 
of  goods  to  arrive  ?  Who  is  responsible  for  loss  of  the  goods  ?  Under 
what  circumstances  will  the  buyer  be  responsible.  What  are  chattel 
mortgages?  When  is  the  mortgagee  entitled  to  possession  of  the  prop- 
erty ?  What  is  said  of  the  form  of  the  mortgage  ?  What  conditions 
should  be  complied  with  ?  What  is  the  law  regarding  recording  ? 
What  is  the  object  of  recording  ?  What  is  the  effect  of  failure?  What 
is  foreclosure?  How  are  mortgages  foreclosed  ?  What  is  the  effect  of 
foreclosure. 


I 


CHAPTER  XXII. 


BAILMENTS  OF  PERSONAL  PROPERTY. 


Definition. — A  bailment  is  a  delivery  of  personal  property  in  trust 
for  some  special  purpose,  and  upon  a  contract,  expressed  or  implied, 
that  the  person  to  whom  it  is  delivered  will  conform  to  the  object  or 
purpose  for  which  the  property  was  delivered ;  that  is  to  say,  it  is  a 
delivery  of  personal  property  by  the  bailor  to  the  bailee,  upon  a  con- 
tract that  the  bailee  will  do  something  with  the  property.  A  bailment 
differs  from  a  sale  in  that  in  a  bailment  the  title  to  the  property  is  not 
transferred,  whereas  in  a  sale  it  is.  Bailments  are  divided  into  two 
general  classes  :  (1)  those  in  which  it  is  exclusively  for  the  benefit  of 
one  party  or  a  third  person  ;  and  (2)  those  in  which  it  is  for  the  benefit 
of  both  parties,  or  of  both  or  one  of  them  and  a  third  person.  Bail- 
ments for  the  benefit  of  one  of  the  parties  may  be  for  the  benefit  of 
either  bailor  or  bailee. 

Degrees  of  Diligence. — The  important  part  of  the  law  of  bailments 
is  in  determining  the  circumstances  in  which  the  bailee  is  responsible  for 
the  loss  of  the  goods;  and  the  circumstances  under  which  he  is  respon- 
sible depend  on  the  kind  of  bailment,  that  is  for  whose  benefit  it  is. 
Connected  with  bailments,  the  law  recognizes  three  degrees  of  diligence, 
ordinary,  extraordinary,  and  slight.  Just  what  constitutes  these  differ- 
ent grades  of  diligence  can  be  determined  only  in  view  of  the  circum- 
stances of  each  particular  case.  Ordinary  diligence  is  that  degree  of 
care  which  prudent  men  ordinarily  exercise  in  respect  to  their  own 
concerns.  It  is  obvious,  however,  that  this  is  a  variable  standard. 
Acts  which  in  one  country  or  in  one  age  may  be  deemed  negligent, 
may  in  others  be  deemed  an  exercise  of  ordinary  diligence.  So,  also, 
what  constitutes  ordinary  diligence  may  be  affected  by  the  nature,  the 
bulk  and  the  value  of  the  articles.  Slight  diligence  is  less  than  the 
degree  of  care  which  ordinarily  prudent  men  give  to  their  own  con- 
cerns, that  is,  less  than  ordinary  diligence  ;  and  extraordinary  diligence 
is  more  than  ordinary  diligence.  Of  course,  there  are  all  degrees  of 
care,  from  the  extraordinary  diligence  which  results  from  the  bestowal 
of  undivided  attention  to  the  welfare  of  the  article,  to  that  absence  of 

105 


106  BAILMENTS   OF   PERSONAL   PEOPEETY. 

care  which  amounts  to  wilful  and  criminal  negligence,  but  these  three 
degeees  are  all  that  the  law  specifies. 

Degrees  of  Negligence. — Corresponding  to  these  three  degrees  of 
diligence  we  have  three  degrees  of  negligence,  ordinary,  slight  and 
gross.  Ordinary  negligence  may  be  defined  to  be  the  want  of  ordinary 
diligence  ;  slight  negligence  to  be  the  want  of  extraordinary  diligence  ; 
and  gross  negligence  to  be  the  want  of  slight  diligence. 

Application  to  Bailments. — Whether  one  or  the  other  of  these 
degrees  of  diligence  is  required  of  the  bailee,  and  whether  he  is  respon- 
sible for  one  or  the  other  of  these  degrees  of  negligence,  depend  upon 
the  object  of  the  bailment.  If  the  bailment  is  for  the  benefit  of  the 
bailor  exclusively,  then  the  bailee  is  bound  to  take  only  slight  care  of 
the  property.  Since  it  is  purely  a  gratuitous  work  on  the  part  of  the 
bailee,  he  receiving  no  benefit  from  it,  he  is  held  to  be  responsible  only 
where  he  is  grossly  negligent.  When  the  bailment  is  exclusively  for  the 
benefit  of  the  bailee,  just  the  opposite  is  true.  The  bailee  receiving 
the  benefit  and  paying  nothing  for  it,  is  bound  to  exercise  extraordinary 
diligence,  and  will  be  responsible  for  slight  negligence.  Where  the 
bailment  is  for  the  benefit  of  both,  and  both  pay  something  for  this 
benefit,  the  law  requires  ordinary  diligence  on  the  part  of  the  bailee 
and  makes  him  responsible  for  ordinary  negligence.  We  shall  find  still 
other  cases  where  the  policy  of  the  law  makes  the  bailee  responsible  for 
very  slight  negligence,  or  even  no  negligence  at  all. 

Kinds  of  Bailment. — Of  bailments  which  are  exclusively  for  the 
benefit  of  the  bailor,  we  have  two  kinds,  deposit,  and  commission. 
The  only  kind  of  bailment  which  is  exclusively  for  the  benefit  of  the 
bailee  is  in  case  of  a  loan  for  use.  Of  bailments  for  the  benefit  of  both 
parties  we  have  the  pledge,  and  the  bailment  for  hire.  Bailments  for 
hire  we  shall  find  to  be  divided  into  several  classes. 

Deposit  is  a  simple  delivery  of  goods  to  be  ke^jt  by  the  bailee  with- 
out reward,  and  delivered  according  to  the  object  or  purpose  of  the 
original  trust.  The  deposit  may  be  simply  for  safe  keeping,  the  goods 
to  be  returned  to  the  bailor  at  a  certain  time  or  on  demand,  or  they 
may  be  deposited  for  the  benefit  of  a  third  person  to  be  delivered  to 
him  at  a  certain  time  or  on  demand.  Since  in  this  class  of  bailments 
the  keeping  is  always  without  compensation,  the  bailee  is  bound  to 
exercise  only  slight  care  over  the  goods,  and  is  responsible  only  for 
gross  negligence.  We  have  already  seen  that  what  is  slight  care  and 
gross  negligence  depend  very  much  on  the  circumstances  of  each  par- 
ticular case.  In  this  class  of  bailments  the  bailor,  the  one  who  deposits 
the  goods,  is  frequently  called  the  depositor,  and  the  bailee,  the  one 
who  receives  the  goods,  the  depositary. 


BAILMENTS   Or    PERSONAL   PliOPEKTY.  10? 

Finding  Lost  Property. — When  one  finds  money  or  other  property 
that  has  been  lost,  he  can  do  as  he  pleases  about  taking  it  into  his  pos- 
session. If  he  takes  it  into  his  care  a  bailment  is  thereby  created,  and 
the  law  imposes  upon  him  the  duties  of  a  depositary.  Ho  must  ueliver 
the  property  to  the  owner  on  demand,  and  is  not  ordinarily  entitled  to 
a  compensation  for  his  services.  If  a  reward  has  been  offered  for  the 
return  of  the  property,  the  finder  acquires  a  right  to  the  compensation 
named,  and  he  may  enforce  payment  by  an  action.  Some  states  pro- 
vide by  statute  for  a  compensation  to  persons  who  take  up  animals 
found  astray  on  their  premises. 

Returning-  Property. — The  depositary  is  obliged  to  return  the 
deposit  whenever  it  is  properly  demanded,  and  he  must  not  only  return 
the  thing  left  with  him,  but  he  must  also  return  all  increase  or  profits 
that  may  have  been  added  to  it.  A  bailee  without  compensation,  how- 
ever, need  not  wait  for  a  demand  of  the  property  unless  he  wants  to. 
He  may  return  it  to  the  owner  at  r.ny  time,  and  terminate  his  responsi- 
bility. If  the  owner  of  the  goods  refuses  to  accept  them  and  take  them 
away  within  a  reasonable  time  after  they  are  offered,  the  bailee  may 
remove  them  from  his  premises  and  will  not  be  responsible  for  any 
resulting  loss. 

Use  of  Property. — The  rule  is  that  the  bailee  has  no  right  to  use 
the  property  left  with  him,  but  this  must  be  accepted  with  the  qualifi- 
cation that  if  the  nature  of  the  property  is  such  that  it  will  be  bene- 
fitted by  moderate  use,  it  may  be  so  used  without  any  extraordinary 
risk.  In  such  case  it  will  be  presumed  that  the  depositor  intended 
such  use  to  be  made  of  it.  For  example,  the  depositary  may  exercise 
a  horse  reasonably  or  milk  a  cow,  as  such  use  would  be  beneficial  to  the 
animal,  but  he  must  account  to  the  bailor  for  any  profits  of  such  use, 
and  may  demand  that  his  necessary  expenses  be  returned  to  him. 

Commission. — This  is  a  bailment  in  which  the  bailee  undertakes 
without  compensation  to  do  some  act  for  the  bailor  with  the  thing 
bailed,  as  to  deliver  it  to  a  certain  person  or  at  a  certain  place.  This 
being  also  a  bailment  exclusively  for  the  benefit  of  the  bailor,  the  bailee 
is  bound  to  exercise  only  Jiglit  diligence  in  performing  the  trust,  and 
is  responsible  only  for  gross  neglect.  "While  this  bailment  is  said  to  be 
without  compensation,  the  bailee  is  entitled,  as  in  deposit,  to  have 
returned  to  him  his  necessary  expenses  incurred  in  the  discharge  of  his 
duty. 

Loan  for  Use. — A  bailment  of  this  class  is  the  loan  of  an  article  to  be 
used  by  the  borrower,  without  paying  for  the  use,  and  returned  to  the 
lender,  or  disposed  of  according  to  his  direction,  at  the  termination  of  the 
bailment.    As  the  loan  is  exclusively  for  the  benefit  of  the  borrower  with- 


108  BAILMENTS   OF    PERSONAL   PROPERTY, 

out  compensation  to  the  lender,  the  borrower  is  bound  to  exercise  extra- 
ordinary diligence  in  the  care  of  the  article,  and  is  responsible  for  slight 
negligence.  The  borrower  is  exempted  from  liability  for  losses  by 
inevitable  accidents  which  cannot  be  foreseen  and  guarded  ^gainst. 
However,  in  order  to  be  exempted  from  responsibility  even  for  inevita- 
ble accident,  the  borrower  must  use  the  article  strictly  in  accordance 
with  the  agreement.  If  a  person  borrows  a  horse  to  ride  on  a  par- 
ticular journey,  and  uses  it  for  another  journey  or  another  purpose, 
he  will  be  responsible  for  any  loss  which  may  happen  during  such 
unauthorized  use,  even  though  it  is  caused  by  inevitable  accident.  The 
borrower  is  never  liable  for  any  loss  or  damage  resulting  simply  and 
naturally  from  the  proper  use  of  the  property ;  but  if  the  borrower 
takes  the  property  or  permits  it  to  be  taken  into  dangerous  places  or 
used  at  improper  times,  he  must  bear  any  resulting  loss. 

Return  of  Property. — It  is  the  duty  of  the  borrower  to  return  the 
thing  borrowed  at  the  time  and  jDlace  and  in  the  manner  contemplated 
by  the  contract.  If  no  particular  time  is  agreed  upon,  it  must  be 
within  a  reasonable  time.  Since  this  is  a  bailment  entirely  without 
benefit  to  the  bailor,  he  can  revoke  it  at  his  pleasure  and  thus  demand 
a  return  of  the  property  at  any  time.  However,  it  is  the  duty  of  the 
bailor,  if  the  loan  is  for  a  particular  time,  not  to  recall  the  property 
until  the  time  has  expired.  If  he  unreasonably  revokes  the  loan  and 
occasions  injury  or  loss  to  the  borrower,  he  is  responsible  for  damages. 
If  no  particular  place  is  pointed  out  where  the  property  is  to  be 
returned,  it  should  be  returned  to  the  borrower  at  his  usual  place  of 
residence,  unless  the  thing  properly  belongs  somewhere  else. 

Pledge. — A  pledge  may  be  defined  to  be  a  bailment  of  personal  prop- 
erty as  a  security  for  the  payment  of  a  debt  or  the  performance  of  some 
other  obligation.  A  pledge  differs  from  a  mortgage  in  two  particulars. 
Usually  in  a  mortgage  the  property  is  retained  in  the  possession  of  the 
mortgageor.  In  a  pledge  an  essential  element  is  that  the  property  be  in 
the  possession  of  the  pledgee.  In  a  mortgage,  the  title  passes  condi- 
tionally to  the  mortgagee,  whereas  in  a  pledge  the  title  remains  in  the 
pledgor.  This  is  a  kind  of  bailment  which  is  for  the  benefit  of  both 
parties,  since  the  pledgee  procures  new  or  additional  security,  and  the 
pledgor  receives  additional  credit.  This  being  the  case,  the  bailee  is 
bound  to  exercise  only  ordinary  care,  and  is  liable  for  ordinary  negli- 
gence. 

Use  of  Property. — The  bailee  generally  has  only  the  right  to  hold 
the  property,  and  can  use  it  only  at  his  peril.  If  the  nature  of  the 
property,  however,  be  such  that  use  is  necessary  for  its  preservation,  or 
is  beneficial,  he  may  use  it;  but  it  is  his  duty  to  use  it  in  a  proper  and 


BAILMENTS   OF    PERSONAL   PROPERTY. 


109 


legitimate  manner.  In  all  cases  he  must  account  to  the  pledgor  for 
all  increase  or  profits  derived  from  such  use.  If  the  pledge  is  of  such 
a  nature  that  it  will  be  injured  by  use,  no  right  to  use  it  can  be  presumed. 
Pledgee's  Interest  in  the  Pledge. — The  pledgee  has  a  right  to 
the  possession  of  the  thing  pledged,  during  the  time  and  for  the  objects 
for  which  it  is  pledged,  and  he  may  defend  his  interest  against  all  per- 
sons, including  even  the  pledgor  himself.  The  pledgee  cannot  hold  the 
property  foi;  any  other  debt  than  the  one  for  which  it  Avas  pledged. 
The  pledgee's  interest  depends  upon  his  continued  possession,  and  hence 
a  delivery  of  the  property  to  the  pledgor  will  deprive  him  of  his  security, 
unless  this  redelivery  is  for  some  special  purpose,  and  with  the  under- 
standing that  the  property  is  to  be  returned. 

Klglits  of  the  Pledgor. — The  rights  of  the  pledgor  depend  much 
npon  the  contract  under  which  the  property  is  conveyed.  If  the  posses- 
sion of  the  property  is  given  to  the  pledgee  as  an  ordinary  pawn,  that 
is,  if  the  property  is  sold  on  the  condition  that  it  may  be  redeemed 
within  a  certain  time,  when  that  time  expires  the  pledgor  has  no  right 
whatever  to  the  property.  The  ownership  becomes  absolute  in  the 
pledgee.  If,  however,  the  delivery  is  not  a  transfer  of  ownership,  but 
a  mere  pledge,  the  pledgor  has  never  parted  with  the  title,  and  he  may 
redeem  the  property  at  any  time  before  it  is  sold  by  the  pledgee.  If 
the  pledgee  in  such  cases  does  not  choose  to  exercise  his  right  to  sell, 
he  still  retains  the  property  as  a  pledge,  and  upon  tender  of  the  debt 
may  at  any  time  be  ccmpelled  to  restore  it. 

Sale  of  Pledge. — If  f  he  pledgee's  right  of  possession  were  all  he 
secured  under  the  contract  of  bailment  he  would  not  be  able  to  reim- 
burse himself  for  the  loss  of  the  debt.  The  property  is  not  forfeited 
by  the  pledgor's  failure  to  pay  the  debt,  unless,  as  we  have  seen,  there 
is  a  special  agreement  to  that  effect,  hence  the  pledgee  must  have  some 
further  right  in  order  to  complete  his  protection.  This  he  has  in  the 
right  of  sale.  Before  he  can  sell  the  pledge  he  must  make  a  proper 
demand  for  payment  upon  the  pledgor  after  the  debt  becomes  due. 
Payment  having  been  refused  upon  such  demand,  he  may  upon  giving 
reasonable  notice  to  the  pledgor  to  redeem  it,  and  notifying  him  also  of 
the  time  and  place  of  sale,  proceed  to  sell  the  things  pledged,  and  apply 
the  proceeds  to  the  payment  of  the  debt.  The  sale  must  be  open  and 
public,  and  the  notice  to  the  pledgor  is  indispensable,  for  without  that 
the  sale  would  be  a  wrongfitl  conversion  of  the  property,  and  would 
render  the  pledgee  liable  for  damages.  The  pledgee  is  not  allowed  to 
retain  the  property  and  appropriate  it  to  the  payment  of  the  debt.  He 
must  sell  it  and  apply  the  proceeds,  and  he  is  not  allowed  to  purchase 
the  pro^Derty  himself  even  at  a  public  sale. 


110  BAILMENTS    OF    PEKSOKAL   PllOPERTY. 

Bailment  for  Hii*e. — This  is  a  bailment  of  personal  property  where 
a  compensation  is  given  for  its  use,  or  for  labor  or  services  about  it. 
This  class  of  bailments  is  for  the  benefit  of  both  parties,  consequently 
the  bailee  must  exercise  ordinary  diligence,  and  is  responsible  for  ordi- 
nary negligence;  and  he  is  responsible  not  only  for  his  own  negligence, 
but  also  for  the  negligence  of  his  servants.  He  is  not  responsible,  of 
course,  for  loss  arising  from  inevitable  accident  or  superior  force,  un- 
less it  has  occurred  through  his  failure  to  use  ordinary  diligence  in  the 
care  of  the  articles.  Bailments  for  hire  are  of  four  classes:  (1)  hire  of 
things,  (2)  hire  of  services,  (3)  hire  of  custody,  and  (4)  hire  of  carriage. 

Hire  of  Things. — This  means  the  hire  of  a  chattel  for  a  particular 
use;  the  bailor  is  often  called  the  letter  and  the  bailee  the  hirer.  The 
hirer  is  bound  to  use  the  property  for  the  purpose  for  which  it  was  hired. 
If  he  hires  a  span  of  horses  and  a  carriage  to  drive  on  a  particular  jour- 
ney, he  must  not  take  the  team  off  the  carriage  and  use  it  on  a  plow  or 
reaping  machine,  nor  must  he  drive  it  on  any  other  journey  than  the 
one  for  which  it  was  hired.  Should  he  do  this  it  not  only  renders  him 
liable  for  damages  for  a  breach  of  the  contract,  but  it  changes  the  degree 
of  his  liability,  so  that  should  the  horses  be  injured  or  killed,  even  by 
inevitable  accident,  while  engaged  in  this  other  work,  he  must  answer 
for  the  loss.  It  is  the  hirer's  duty  to  return  the  property  to  the  owner 
when  the  purpose  of  the  bailment  is  fulfilled,  and  he  must  return  it  in 
as  good  condition  as  when  received,  except  for  natural  wear. 

Hire  of  SerA-lces. — This  is  a  delivery  of  goods  to  have  some  work 
done  on  or  about  them;  as  where  a  watch  is  delivered  to  a  jeweler,  or  a 
pair  of  shoes  to  a  shoemaker,  to  be  repaired  and  returned.  If  the  work 
be  of  an  ordinary  kind  the  bailee  may  employ  others  to  do  it  for  him, 
but  if  the  contract  implies  the  exercise  of  personal  skill,  like  in  painting 
a  picture,  he  cannot,  without  permission,  have  the  work  done  by  other 
persons. 

Liability. — The  rule  that  in  bailments  for  the  benefit  of  both  parties, 
the  bailee  is  responsible  for  ordinary  negligence,  must  be  modified  in  its 
application  to  the  hire  of  services,  because  the  subject  includes  all  kinds 
of  services,  and  in  some  instances  great  skill  is  necessary.  Wherever 
this  is  the  case  the  degree  of  care  and  diligence  necessary  on  the  jjart  of 
the  bailee  increases  in  proportion  to  the  skill  required.  A  blacksmith 
hired  to  forge  a  log-chain  would  need  to  exercise  much  less  diligence 
than  a  watchmaker  in  repairing  a  watch.  Where  a  workman  engages 
to  do  some  special  work  requiring  a  particular  kind  of  skill,  he  must  be 
presumed  to  possess  it  in  an  ordinary  degree,  and  if  he  fails  to  exercise 
such  skill,  or  in  fact  does  not  possess  it,  he  will  be  responsible  in 
damages.     To  determine  whether  the  bailee  is  liable  for  damages  on 


BAILMENTS  OF  PERSONAL  PROPERTY.  Ill 

account  of  a  luck  of  skill  it  is  ouly  necessaiy  to  iuqiiirc:  has  lie  exer- 
cised the  degree  of  skill  and  diligence  ordinarily  exercised  in  this  branch 
of  work  ?  If  he  has  then  he  is  not  liable  for  damages  for  injury;  if  he 
has  not  then  he  is  liable. 

Lien. — In  order  to  secure  to  the  bailee  in  this  class  of  bailments  com- 
pensation for  his  services  rendered  on  the  property  bailed,  he  has  what 
is  known  as  the  right  of  lien;  that  is,  if  the  bailor  refuses  to  pay  him 
for  his  services  he  is  entitled  to  retain  possession  of  the  property  until 
he  is  paid.  If  the  bailor  absolutely  refuses  to  pay  him  within  a  reason- 
able time  the  bailee  may,  on  giving  public  notice,  sell  the  property  at 
auction  and  compensate  himself  out  of  the  proceeds,  returning  the  re- 
mainder, of  course,  after  all  costs  are  paid,  to  the  bailor. 

Hire  of  Custody. — This  is  a  kind  of  bailment  in  which  the  property 
is  placed  in  the  hands  of  the  bailee  to  be  kept  and  cared  for  by  him  for 
a  compensation.  Examples  are  warehousemen,  who  make  it  a  business 
to  store  goods  for  others;  wharfingers,  who  keep  a  wharf  for  the  purpose 
of  receiving  goods  to  it  or  shipping  them  from  it;  forwarders,  who  re- 
ceive and  forward  goods;  agisters,  who  receive  cattle  and  horses  for 
pasture;  and  innkeepers,  who  take  charge  of  a  guest's  baggage.  In  all 
these  different  classes  of  bailments,  except  innkeepers,  since  they  are 
for  the  benefit  of  both  parties,  ordinary  diligence  is  required  of  the 
bailee,  and  he  is  responsible  for  ordinary  negligence.  As  we  shall  see, 
innkeepers  are  subjected  to  a  different  degree  of  liability  from  other 
bailees  of  this  class. 

Hire  of  Carriage. — This  is  a  bailment  in  which  a  person  agrees  to 
carry  personal  property  from  one  place  to  another  for  a  compensation. 
As  we  have  already  seen,  the  bailment  in  which  a  person  agrees  to  trans- 
port goods  without  compensation,  is  called  commission  or  mandate. 
The  only  difference  between  commission  and  the  hire  of  carriage,  is  in 
the  fact  that  the  bailee  receives  a  compensation  in  the  latter  and  is 
obliged  to  use  ordinary  diligence,  and  is  responsible  for  ordinary  negli- 
gence. He  is,  of  course,  liable  for  the  negligence  of  his  servants  as  well 
as  his  own.  Of  carriers  there  are  two  kinds,  private  carriers  and  com- 
mon carriers,  and  this  rule  of  liability  applies  only  to  private  carriers, 
persons  who  agree  for  a  compensation  to  carry  goods  on  some  particular 
occasion  or  for  a  particular  person,  but  do  not  make  it  a  business  to 
carry  for  the  public.  Common  carriers,  like  innkeepers,  are  subjected 
to  a  different  degree  of  liability  from  other  bailees  of  their  class. 

QUESTIONS. 

Define  bailment;  distinguish  between  bailment  and  sale;  what  gen- 
eral classes  of  bailment  are  there  ?     What  degrees  of  diligence  does  the 


112  BAILMENTS   OF    PERSONAL   PROPERTY. 

law  recognize?  define  each.  What  degrees  of  negligence  are  recognized ? 
define  each.  How  are  these  degrees  of  diligence  and  negligence  applied 
to  bailments?  What  kinds  of  bailments  are  for  the  exclusive  benefit  of 
bailee?  bailor?  both?  Define  deposit;  give  the  rule  of  liability.  What 
rights  has  a  finder  of  lost  property?  What  is  said  of  the  return  of  prop- 
erty deposited?  use  of  property?  Define  commission;  give  the  rule  of 
liability.  Define  loan  for  use;  give  rule  of  liability;  what  is  said  of  the 
return  of  property?  Define  pledge;  distinguish  between  mortgage  and 
pledge;  what  is  said  of  the  use  of  property?  What  rights  has  the  pledgee 
to  the  property  pledged?  Give  effect  of  return  of  property?  What 
rights  has  the  pledgor?  What  is  said  of  the  sale  of  pledge?  Define 
bailment  for  hire;  what  kinds  are  there?  give  the  rule  of  liability. 
Define  hire  of  things;  give  duties  of  the  hirer.  Define  hire  of  services; 
give  duties  of  bailee.  Define  hire  of  custody;  hire  of  carriage;  what 
kinds  of  carriage  are  there? 


CHAPTER  XXIII. 


INNKEEPERS. 


Innkeepers. — An  innkeeper  is  a  person  who  keeps  an  inn,  tavern  or 
hotel  for  the  lodging  and  entertainment  of  travelers,  for  a  compensa- 
tion. The  keeper  is  commonly  known  as  a  landlord,  and  the  traveler 
whom  he  entertains,  as  a  guest.  Whether  a  house  is  an  inn  or  not 
cannot  be  determined  by  the  extent  of  its  accommodations.  It  is  an 
inn  if  the  proprietor  furnishes  beds  and  meals  for  travelers  as  a  busi- 
ness. The  innkeeper  must  be  distinguished  from  the  keejier  of  a  board- 
ing house.  The  latter  takes  persons  to  board  or  lodge  regularly  while 
the  innkeeper  only  keeps  them  for  a  sliort  time.  A  place,  however, 
may  be  an  inn  for  some  and  a  boarding  house  for  others.  Almost  everjr 
hotel,  in  addition  to  accommodating  travelers  as  an  inn,  has  its  regulai 
boarders  to  whom  it  is  a  boarding  house.  Innkeepers  are  considered 
under  the  head  of  bailments,  because  a  large  part  of  the  law  concerning 
innkeepers  relates  to  their  liability  for  goods  left  in  their  care  by  the 
guests.    In  this  way  innkeepers  become  bailees  and  their  guests  bailors. 

Landlord's  Duties. — The  keeper  of  an  inn  is  bound  to  receive 
travelers.  He  offers  the  accommodations  of  his  house  to  the  public, 
and  hence  he  must  serve  those  who  apply.  He  may  demand  payment 
in  advance  for  their  entertainment,  but  having  room  he  must  receive  all 
travelers  and  their  baggage  at  any  hour  of  the  day  or  night.  He  is  not 
bound,  however,  to  receive  drunken  or  disorderly  persons,  nor  such  as 
are  infected  with  contagious  diseases  or  would  otherwise  endanger  the 
safety  of  his  guests,  and  if  any  of  his  guests  become  so  while  at  his 
house  he  may  require  them  to  leave.  If  an  innkeeper  has  room  and 
refuses  to  receive  a  proper  person,  and  give  him  entertainment,  he  will 
be  responsible  in  damages. 

Guests. — Persons  received  and  entertained  at  a  hotel  are  called 
guests.  A  guest  is  supposed  to  be  a  traveler,  one  who  is  transiently  at 
the  place,  and  desires  food  and  lodging  for  a  time.  It  matters  not  how 
long  he  remains  at  the  inn  so  long  as  he  retains  his  character  as  a 
traveler  and  temporary  sojourner;  he  is  still  a  guest  and  entitled  to  all 
the  rights  and  privileges  and  subject  to  the  liabilities  of  such. 

Innkeeper's  Liability.— It  is  the  policy  of  the  law  to  impose  extra- 
Q  113 


114  INNKEEPERS. 

ordinary  responsibility  on  certain  classes  of  persons  in  whom  an 
extraordinary  confidence  is  necessarily  reposed,  and  where  there  is  an 
extraordinary  temptation  to  fraud.  There  are  two  classes  of  persons 
on  whom  the  law  imposes  this  severe  liability,  innl<;eepers  and  common 
carriers.  The  innkeeper  is  an  insurer  of  the  property  committed  to  his 
care  against  everything  but  the  act  of  God  or  the  public  enemy,  or  the 
neglect  or  fraud  of  the  owner  of  the  property.  He  is  liable  for  a  loss 
occasioned  by  the  negligence  of  his  servants,  by  other  guests,  by  rob- 
bery or  burglary  from  outsiders,  or  by  rioters  and  mobs.  An  innkeeper 
cannot  relieve  himself  from  this  liability  by  expressly  refusing  to  be 
responsible,  since  the  law  will  not  permit  him  to  thus  escape  his  own 
proper  duty.  An  innkeeper,  however,  has  the  right  to  have  his  guests' 
property  deposited  in  some  safe  place  provided  by  him  in  order  to 
guard  himself  against  loss.  If  the  landlord  gives  notice  to  the  guest 
that  property  must  be  thus  deposited,  and  the  guest  neglects  to  deposit 
it,  the  landlord's  responsibility  then  ceases,  and  the  guest  takes  the  risk 
of  loss  upon  himself. 

Liandlord's  Lien. — The  innkeeper  has  a  lien  upon  the  goods  and 
baggage  of  his  guest  for  his  reasonable  charges.  The  law  gives  him 
this  lien  because  he  is  obliged  to  receive  and  entertain  strangers,  and 
this  lien  covers  any  goods  brought  to  the  hotel  by  the  guest,  even 
though  they  belong  to  some  other  person,  provided  the  landlord  does 
not  know  that  fact.  Whatever  goods  have  been  brought  to  the  inn  by 
the  guest,  except  such  as  are  worn  on  his  person,  are  subject  to  the 
landlord's  lien  and  can  be  held  by  him  against  all  persons  until  his 
charges  are  paid. 

Boarding-  House  Keepers. — A  boarding  house  differs  from  a  hotel 
in  being  designed  for  permanent  boarders  and  not  open  to  the  public. 
The  keeper  of  a  boarding  house  is  bound  to  receive  only  such  persons 
as  he  chooses  and  he  does  not  assume  the  liability  or  become  entitled  to 
the  rights  of  an  innkeeper.  He  is  not  responsible  for  the  loss  of  the 
goods  of  a  boarder,  and  in  the  absence  of  statutory  provisions  has  no 
lien  on  them  for  his  charges.  In  some  states,  however,  it  is  provided 
by  statute  that  a  boarding  house  keeper  shall  have  a  lien  on  the  boarder's 
goods  for  his  charges. 

QUESTIONS. 

What  is  an  innkeeper;  landlord;  guest  ?  What  are  the  duties  of  a 
landlord  ?  What  is  the  liability  of  an  innkeeper  ?  why  different  from 
other  bailees  of  the  same  class  ?  How  may  he  be  relieved  from  this 
liability  ?  What  security  has  a  landlord  that  his  charges  will  be  paid  ? 
What  is  a  boarding  house  keeper  ?  how  different  from  innkeeper  ? 


CHAPTER  XXIY. 


COMMON    CARRIERS. 


Common  Carriers  are  persons  who  undertake  as  a  business  to  trans- 
port the  goods  of  all  who  employ  them,  or  passengers,  from  place  to 
place  for  a  compensation.  The  mode  of  transportation  is  not  material. 
Express,  railroad  and  steamboat  companies  are  common  carriers;  so, 
also,  are  public  truckmen  and  hackmen  in  cities,  and  the  proprietors  of 
stage  lines.  Two  things  are  necessary  to  make  one  a  common  carrier; 
(1)  a  continued  offer  to  the  public  to  carry,  and  (2)  the  charge  of  a 
compensation  for  the  risk  and  labor. 

Duties.— A  private  carrier  is  under  no  obligations  to  carry  for  any- 
one unless  he  pleases  to  do  so,  but  with  a  common  carrier  the  rule  is 
different.  The  common  carrier  enters  into  the  business  voluntarily, 
and  he  may  retire  from  it  at  any  time,  but  as  long  as  he  conducts  the 
business  it  is  his  duty  to  receive  and  transport  all  such  goods  as  come 
within  his  line  of  business.  He  cannot  discriminate  between  persons 
but  must  receive  the  goods  of  all  who  offer  them  to  the  extent  of  his 
carrying  capacity.  It  is  a  good  excuse  for  the  carrier's  refusal  to  carry 
that  his  carriage  is  full,  that  the  goods  will  endanger  him,  or  are  not 
such  as  he  carries  in  the  usual  course  of  his  business. 

Liability  in  General.— As  we  have  seen,  there  are  some  exceptions 
to  the  general  rule  that  in  a  bailment  for  the  benefit  of  both  parties, 
the  bailee  is  only  bound  to  use  ordinary  diligence,  and  is  liable  only 
for  ordinary  negligence.  The  second  of  these  exceptions  is  in  the  case 
of  common  carriers.  The  rule  governing  the  liability  of  a  common 
carrier  rests  on  grounds  of  jiublic  policy.  He  becomes  an  insurer  of 
the  safety  of  the  goods  which  he  carries,  and  is  responsible  for  them 
unless  they  are  injured  by  the  act  of  God  or  the  public  enemy.  Even 
then  the  carrier  is  not  excused  from  liability  where  his  previous  neglect 
brings  the  property  into  danger  resulting  in  such  loss.  Where  his  delay 
exposes  the  property  to  destruction  by  flood,  he  cannot  escape  the 
responsibility.  If  the  carrier  takes  a  different  route  from  the  one 
agreed  upon,  he  at  once  becomes  liable  for  loss  although  resulting  from 
causes  which  would  otherwise  lia,ve  exonerated  him, 

115 


116  COMMON   CAKRIERS. 

L.imitation  of  Liability. — The  common  carrier  may  limit  his  lia- 
bility as  an  insurer  of  the  goods  so  that  he  will  not  always  be  liable  as 
he  would  be  under  the  rules  of  law.  In  some  states  he  may  by  contract, 
exempt  himself  from  responsibility  for  loss  arising  from  the  negligence 
of  his  servants.  In  other  states  he  is  not  permitted  to  exempt  himself 
from  responsibility  for  losses  arising  from  his  own  or  his  servants'  negli- 
gence. He  is  usually  allowed  to  limit  the  amount  of  his  liability, 
unless  the  value  of  the  article  is  stated  by  the  shipper,  and  it  is  taken 
by  the  carrier  with  full  knowledge  of  its  value.  In  any  case,  however, 
he  cannot  limit  his  liability  by  merely  publishing  a  notice  to  that  effect, 
unless  the  attention  of  the  shipper  is  called  to  it.  Such  a  limitation 
incorporated  in  a  bill  of  lading  or  receipt  given  for  the  property  bcomes 
a  part  of  the  contract  between  the  carrier  and  the  owner,  and  will  be 
binding  on  the  owner. 

Carrier's  Cliarg-es. — It  is  not  necessary  that  the  amount  to  be  paid 
for  the  carriage  of  the  goods  should  be  mentioned  in  the  contract;  it  is 
usually  agreed  upon,  however,  and  the  carrier  has  a  right  to  demand 
payment  upon  delivery  of  the  goods.  If  the  compensation  which  the 
carrier  is  to  receive  is  not  fixed  by  law,'  the  carrier  may  determine  it 
himself,  but  having  adopted  and  made  known  a  usual  rate,  he  is  bound 
to  receive  and  transport  goods  for  this  rate.  If  the  jDrice  to  which  he 
is  entitled  is  not  paid,  he  is  not  bound  to  deliver  the  goods  but  may 
hold  them  for  his  charges,  and  if  he  retains  them  in  his  warehouse  or 
place  of  business,  he  then  holds  them,  not  as  a  common  carrier  but  as 
a  warehouseman,  and  is  liable,  in  case  of  loss  or  injury,  only  for  ordinary 
negligence. 

I>elivery  by  Carrier. — This  is  necessary  to  the  complete  perform- 
ance of  the  contract.  The  mode  of  delivery  is  regulated  by  circum- 
stances, such  as  the  kind  of  conveyance  and  the  nature  of  the  goods. 
A  carrier  by  coach  is  usually  bound  to  deliver  the  goods  to  the  owner 
at  his  residence  or  place  of  business.  In  case  of  railroad  and  express 
companies,  the  custom  is  to  deliver  the  goods  at  the  depot  or  express 
office  and  send  notice  to  the  consignee  to  come  and  take  them  away. 
After  such  a  notice  has  been  given,  and  the  consignee  has  had  a  reason- 
able time  in  which  to  remove  the  goods,  the  carrier  ceases  to  be  liable 
as  a  common  carrier  and  is  liable  only  as  a  warehouseman.  In  cities 
express  companies  usually  keep  a  wagon  and  deliver  goods  received  by 
them  to  the  consignee,  if  his  residence  or  place  of  business  is  known. 
This  being  the  custom,  of  course  it  is  a  part  of  his  duty.     Where  it  is 


*  The  statutes  of  most  of  the  states  now  provide  that  a  common  carrier  shall  not 
charge  above  a  certain  fixed  rate  for  carrying  goods  or  passengers. 


i 


COMMON   CARRIERS.  117 

the  duty  of  the  carrier  to  deliver  the  goods  to  the  consignee,  the  carrier 
remains  liable  as  a  carrier  until  delivery  is  made  at  the  residence  or 
place  of  business  of  the  consignee. 

Carriers  of  Passengers. — A  carrier  of  passengers  is  one  who  trans- 
ports persons  from  place  to  place  for  a  compensation.  He  makes  an 
engagement  with  the  public  and  becomes  bound  to  convey  all  persons 
who  pay  or  tender  the  usual  fare.  However,  he  is  not  bound  to  take 
persons  who  are  disorderly  or  who  will  in  any  way  injure  his  business. 

Rights  and  Duties. — They  have  a  right  to  prescribe  reasonable 
rules  and  regulations  in  regard  to  the  manner  of  receiving  passengers. 
They  may  insist  that  the  fare  be  paid  in  advance  and  that  each  passen- 
ger shall  show  his  ticket  on  request.  For  a  refusal  to  pay  they  may 
refuse  to  receive  a  passenger,  and  for  a  refusal  to  show  his  ticket  they 
may  put  him  oflp,  but  must  not  use  unnecessary  violence.  If  tlie  parties 
have  agreed  that  a  railroad  ticket  shall  be  used  only  on  a  particular  train 
or  day,  it  can  not  be  used  otherwise. 

Bagg-ag-e. — It  is  now  held  that  the  payment  of  a  passenger's  fare  in- 
cludes the  payment  for  the  carriage  of  necessary  baggage.  There  has 
been  some  difficulty  in  determining  what  should  properly  be  included 
in  the  term  "  baggage,"  but  it  is  now  held  to  comprise  anything  which 
even  an  eccentric  traveler  may  carry  on  a  long  journey  for  his  personal 
convenience.  Samples  of  goods,  silverware  and  money  in  large  quan- 
tities, cannot  be  considered  baggage.  The  carrier  is  liable  for  baggage 
the  same  as  a  common  carrier  of  goods,  and  he  cannot  limit  his  liability 
by  a  general  notice,  although  he  may  make  a  contract  to  that  effect. 
It  is  customary  for  carriers  of  passengers  to  have  printed  in  their  tickets 
a  notice  like  "Baggage  liability  limited  to  $100,"  and  where  this  is  the 
case  more  than  this  amount  cannot  be  collected  as  damages  for  the  loss 
of  baggage.  Where  a  railroad  company  sells  through  tickets  over  its 
own  and  other  roads  forming  a  continuous  connection,  and  checks  the 
baggage  of  its  passengers  through  to  their  destination,  it  is  bound  to 
deliver  it  at  that  point  and  is  liable  for  it  there. 

Liability. — A  carrier  of  passengers  is  not  under  the  same  strict  rule 
of  liability  as  a  carrier  of  goods.  A  carrier  of  goods  is  liable  for  any 
loss  of  the  goods  not  occurring  by  the  act  of  God  or  the  public  enemy, 
Avhether  it  occurs  through  his  negligence  or  not.  A  carrier  of  passen- 
gers is  only  liable  for  injury  to  a  passenger  when  it  occurs  through  the 
negligence  of  the  carrier  or  his  servants,  but  he  is  liable  for  any  negli- 
gence, however  slight.  The  law  exacts  from  him  the  highest  degree  of 
diligence  and  foresight.  A  railroad  company  is  bound  to  exercise  the 
greatest  care  in  procuring  and  using  roadworthy  cars,  in  the  manage- 
ment of  its  trains,  and  in  the  construction  of  its  tracks  and  bridges,  and 


118  COMMON   CAKEIEKS. 

it  is  responsible  for  any  injury  unless  it  can  show  that  such  injury  was 
not  caused  by  its  failure  to  use  such  diligence. 

Contributory  Negligence. — Where  one  sues  a  carrier  to  recover 
damages  for  personal  injuries,  it  must  appear  that  his  own  negligence 
did  not  contribute  to  such  injuries.  A  carrier  may  prescribe  reason- 
able rules  for  the  conduct  of  passengers,  and  if  a  passenger  is  injured 
by  reason  of  a  failure  to  comply  with  these  regulations,  the  carrier  is 
not  responsible.  So  if  a  third  party  is  injured  while  trespassing  on  the 
company's  grounds  and  by  his  own  negligence,  the  company  is  not  re- 
sponsible. 

Negligence  as  to  Third  Parties. — Eailroad  companies  are  liable 
for  negligence  the  same  as  individuals.  When  their  tracks  cross  public 
highways,  they  must  take  every  precaution  to  avoid  injury  to  persons 
or  property.  They  must  carry  out  the  provisions  of  the  statutes  requir- 
ing the  building  offences,  cattle  guards,  etc.;  the  ringing  of  bells;  and 
conformity  to  certain  rates  of  speed.  A  failure  to  conform  to  all  the 
requirements  of  the  law  in  these  matters  will  subject  them  to  the  pay- 
ment of  heavy  damages  if  this  failure  results  in  injury  to  third  parties. 
They  are  responsible  for  any  injury  to  persons  or  property  which  is  in 
any  way  the  result  of  their  negligence. 

Telegraph  Companies  are  in  some  respects  common  carriers  and 
are  properly  considered  under  this  head.  They  are  carrying  on  a  busi- 
ness which  is  in  a  certain  sense  public;  they  offer  their  services  to  the 
public  and  must  serve  those  who  offer  the  usual  compensation  for  such 
service.  As  in  the  case  of  common  carriers,  a  refusal  on  the  part  of  a 
telegraph  company  to  send  a  message,  for  which  the  usual  compensa- 
tion is  tendered,  will  make  it  liable  for  damages. 

Rights  and  Duties. — It  is  the  duty  of  the  company  to  send  each 
message  as  soon  as  possible,  in  its  regular  order,  and  just  as  it  is  given 
it  to  send;  it  is  not  even  allowable  for  it  to  correct  an  evident  mistake 
in  spelling  or  grammar.  The  company  must  deliver  the  message  to 
the  person  addressed  if  it  is  possible  to  find  him,  although  it  may  make 
an  additional  charge  for  any  extra  trouble  it  may  be  to  in  finding  him, 
and  may  refuse  to  deliver  the  message  until  this  is  paid.  Telegraph 
messages  being  confidential,  the  company  must  not  divulge  the  contents 
of  a  message  to  any  person  other  than  the  one  to  whom  it  is  addressed. 

Liability. — Ordinarily  a  telegraph  company  is  liable  to  the  sender  of 
a  message  for  any  failure  to  send  or  deliver  a  message  according  to  its 
agreement.  Its  contract  is  only  with  the  sender,  consequently  it  is  not 
liable  to  the  receiver  for  any  negligence.  Messages  are  usually  written 
on  blanks  furnished  by  the  company,  on  which  are  printed  certain 
conditions  in  the  form  of  a  contract.     These  usually  specify  that  the 


1 


COMMON   CARRIERS.  119 

company  will  be  liable  in  damages  for  incorrect  transmission  only  on 
certain  conditions  and,  of  course,  these  conditions  must  be  complied 
with  in  order  to  hold  it  responsible. 

QUESTIONS. 

Define  common  carrier;  give  examples;  what  conditions  are  neces- 
sary? What  are  the  duties  of  a  common  carrier?  Give  the  rule  of  a 
common  carrier's  liability;  how  may  it  be  limited?  What  security  has 
he  that  his  charges  will  be  paid?  When  does  the  carrier's  liability  end? 
What  is  a  carrier  of  passengers?  What  are  his  rights  and  duties?  What 
does  the  term  baggage  include?  What  is  the  carrier's  liability  with 
regard  to  it?  How  may  it  be  limited?  Give  the  general  liability  of  .: 
carrier  of  passengers;  how  different  from  that  of  a  common  carrier. 
What  is  contributory  negligence?  What  is  its  effect?  What  is  said  of 
the  carrier's  liability  for  injury  to  third  parties?  What  is  the  business 
of  a  telegraph  company?  What  is  their  relation  to  the  public?  What 
are  their  duties?  rights?    Under  what  circumstances  are  they  liable!-' 


CHAPTEE  XXT. 


SHIPPING. 


Definitions  and  ^Explanations. — A  contract  for  shipping,  or  of 
affreightment,  is  an  agreement  for  carrying  goods  by  water.  The  con- 
veyance may  be  any  craft  from  the  smallest  lake  or  river  boat  to  the 
largest  ocean  steamer.  The  parties  to  the  contract  are  the  owner  of 
the  vessel,  and  the  shipper  or  merchant  who  owns  the  goods.  There  is 
sometimes  a  third  party  or  middle-man  who  is  simply  the  charterer  of 
the  vessel.  In  this  case  he  has  no  goods  to  carry,  but  hires  the  vessel 
from  the  owner  for  the  puriDose  of  conducting  a  carrying  trade. 
Usually,  however,  the  shipper  himself  hires  the  vessel,  and  in  that  case 
he  becomes  also  the  charterer.  The  contract  between  the  parties 
involves  either  the  hire  of  the  vessel  or  a  part  of  it,  when  it  is  called 
the  charter  party,  or  the  carriage  of  the  goods,  when  it  is  called  a  bill 
of  lading. 

The  Charter  Party. — The  owner  of  a  vessel  may  charter  it  in  two 
ways;  he  may  hire  it  to  one  or  more  merchants,  reserving  possession  of 
and  navigating  it  himself  according  to  the  contract,  or  he  may  hire  it 
absolutely,  giving  possession  to  the  hirer.  The  contract  by  which  the 
vessel  is  hired  is  called  a  charter  party. 

In  the  first  case  the  charter  party  may  be  defined  as  a  contract  of 
affreightment,  by  which  an  entire  ship  or  some  part  of  it  is  let  to  the 
shipper  for  the  conveyance  of  goods  on  a  particular  voyage  in  consider- 
ation of  the  payment  of  freight.  In  the  case  of  inland  waters  navigable 
for  only  a  portion  of  the  year,  the  contract  is  often  made  not  for  a 
particular  voyage  but  for  the  season.  In  this  form  of  the  charter  party, 
is  usually  set  forth:  (1)  the  names  of  the  parties  and  the  name  of 
the  ship;  (2)  a  description  of  the  voyage  to  be  performed;  (3)  the 
covenants  on  the  part  of  the  owner  as  to  the  good  condition  and  sea- 
worthiness of  the  vessel;  (4)  particular  agreements  as  to  the  goods  to 
be  carried,  reservations  of  portions  of  the  vessel  to  the  owner,  etc. ;  (5) 
a  statement  of  the  excepted  perils  for  which  the  owner  does  not  intend 
to  be  responsible.  These  are  usually  the  acts  of  God,  or  public  enemies, 
detentions  by  the  sovereign  power  of  any  state  or  government,  fire, 
perils  of  the  sea,  and  all  other  unavoidable  dangers  and  accidents.  (6) 
The  covenants  by  the  charterer  to  load  and  unload,  within  a  given 
time,  and  providing  for  the  amount  and  payment  of  freight  and  demur- 

130 


SHIPPING.  121 

rage.  The  allowance  to  be  made  by  the  shipper  to  the  yessel  owner  as 
damages  for  each  day's  detention  of  the  vessel  at  any  port  beyond  the 
time  specified  in  the  charter  party,  is  called  demurrage. 

In  the  second  case  the  charter  party  is  a  contract  whereby  the  owner 
lets  the  vessel  to  the  charterer  for  a  given  time,  or  particular  voyage, 
and  turns  over  to  him  the  entire  possession  of  it.  It  is  in  form  quite 
like  a  lease,  and  during  the  time  for  which  it  is  chartered  the  owner 
has  no  right  to  or  control  over  it,  but  at  the  end  of  that  time  the 
charterer  must  return  it  to  him  in  as  good  condition  as  when  hired, 
ordinary  wear  and  tear  excepted.  The  essential  difference  between  the 
two  forms  of  charter  party  arises  from  the  fact  that  in  the  former  the 
owner  retains  possession  and  in  the  latter  he  surrenders  it  to  the  hirer. 

The  Bill  of  Lading. — Where  a  ship  is  let,  wholly  or  in  part,  to  one 
or  more  merchants  it  is  called  a  chartered  ship.  Very  often,  however, 
the  owner  himself  navigates  the  vessel,  receiving  and  carrying  freight 
indifferently  for  all  who  apply,  the  same  as  any  other  common  carrier, 
in  which  case  his  vessel  is  known  as  a  general  ship.  The  contract 
between  the  owner  and  the  shipper  in  this  case  pertains  entirely  to  the 
conveyance  of  the  goods,  and  is  called  a  bill  of  lading.  It  is  a  written 
memorandum,  signed  by  the  captain  or  master  of  the  vessel  as  agent 
for  the  owner  or  charterer,  and  delivered  to  the  shipper  acknowl- 
edging that  the  goods  mentioned  in  it  have  been  received  upon  the 
vessel  for  transportation.  The  shipper  who  thus  sends  or  consigns  the 
goods  is  known  as  the  consignor,  while  the  person  to  whom  they  are 
sent,  is  called  the  consignee. 

The  following  is  a  proper  form  for  a  bill  of  lading,  though  without 
the  enumeration  of  the  excepted  dangers,  and  the  conditions  regarding 
place  and  manner  of  delivery,  which  are  now  generally  included: 

BILL  OF   LADING. 

Shijyi^&d  in  good  order  and  loell  conditioned,  hy  E.  D.  Wilhins  &  Co., 
on  hoard  the  sailing  vessel  called  the  Electric,  whereof  Richard  Brown 
jp    A    a     i^  master,  now  lying  in  the  port  of  Tacoma,  six  thousand 
hunches  of  cedar  shingles  heing  marked  and  numhered  as  in 
LALLAO.     fj^g  margin,  and  are  to  he  delivered  in  the  like  order  and  con- 
dition at  the  port  of  Callao  {the  dangers  of  the  sea  only  excepted)  unto 
Frederick  A.  Sherwood,  or  to  his  assigns,  he  or  they  to  pay  freight  for 
said  shingles,  with  ten  cents  primage  and  average  accustomed. 

In  witness  whereof  the  master  of  said  vessel  hath  affirmed  to  three 
hills  of  lading  each  of  this  tenor  and  date,  one  of  ivhich  heing  accomplished 
the  others  to  stand  void. 
Dated  at  Tacoma,  Wash. ,  the  9th  day  of  May,  1901. 

RICHARD  BROWN,  Master. 


122  SHIPPING. 

Use  of  Bill  of  Lading. — One  of  these  the  master  of  the  vessel 
retains,  while  Wilkins  &  Co.,  the  consignors,  take  the  other  two,  and 
immediately  forward  one  of  them  to  Sherwood,  the  consignee.  When 
the  vessel  arrives  the  bill  of  lading  is  evidence  of  the  consignee's  right 
to  receive  the  property.  Upon  the  delivery  of  the  shingles  to  him,  he 
surrenders  the  bill  of  lading  to  the  master  in  whose  hands  it  becomes 
an  evidence  of  such  deliver3\ 

The  bill  of  lading  is  a  symbol  of  the  property,  and  being  properly 
transferred,  it  operates  as  a  symbolic  delivery  of  that  which  it  repre- 
sents. By  its  terms  the  property  is  to  be  delivered  to  the  consignee  or 
his  assigns,  and  therefore  by  assigning  the  bill  of  lading  to  some  other 
person  he  transfers  his  interest  in  the  property  to  such  assignee.  Bills 
of  lading  are  transferred  by  endorsement  like  negotiable  paper,  and 
very  often  pass  through  several  hands  in  the  course  of  the  payment  of 
business  obligations  before  the  consigned  property  arrives  in  port.  For 
example,  Sherwood  receives  the  foregoing  bill  of  lading  from  Wilkins  & 
Co.,  and  being  indebted  to  W.  E.  Barton,  he  delivers  this  bill  to  him, 
after  writing  his  name  across  the  back  of  it.  He  may  endorse  it  in 
blank  as  he  would  a  bill  of  exchange  or  promissory  note,  or  he  may 
endorse  it  in  full  by  writing  above  his  signature  "deliver  to  W.  E. 
Barton  or  order,"  in  which  case  Barton  would  have  to  endorse  it  him- 
self if  he  wished  to  transfer  it;  and  he  must  so  endorse  it  when  the 
property  is  delivered  to  him. 

Responsibility  for  Losses. — The  owner  or  charterer  of  the  vessel, 
as  we  have  seen,  is  a  common  carrier,  but  in  his  case  there  is  an  excep- 
tion to  the  general  rule  of  liability  of  common  carriers.  He  is  not 
liable  for  damages  occurring  through  certain  extraordinary  perils  of  the 
sea,  and  this  is  what  is  meant  by  the  clause  "the  dangers  of  the  sea 
only  excepted "  in  the  bill  of  lading.  These  dangers  include  loss  by 
storm,  piracy,  and  fire  at  sea.  The  shipper  must  protect  himself 
against  such  Iofscs  by  insuring  the  property. 

Maritime  Loans. — Suppose  the  "Electric"  to  have  been  so  damaged 
by  storm  that  she  cannot  continue  her  voyage  without  putting  into 
port  for  repairs.  This  she  does  at  Acapulco,  Mexico,  but  there  is  no  one 
at  that  place  who  knows  the  master  or  owners  of  the  vessel  or  anything 
about  tlieir  responsibility.  The  master  must  have  money  immediately 
for  repairs.  How  shall  he  borrow  it  ?  There  are  the  ship,  its  accruing 
freight,  and  the  cargo,  but  none  Of  these  belong  to  the  master,  and  yet 
maritime  law  gives  him  the  power  to  pledge  this  property  belonging  to 
others,  as  security  for  the  money  required  for  repairs.  If  the  loan  be 
made  upon  the  vessel  and  accruing  freight,  the  obligation  given  for  it 
is  termed  a  bottomry  bond,  but  if  upon  the  cargo,  it  is  called  a  respon- 
dentia boni 


SHIPPING.  123 

Nature  of  the  Loans. — These  securities  amount  to  mortgages  upon 
the  property,  and  their  payment  depends  upon  the  safe  arrival  of  the 
vessel  at  her  destination.  The  lender,  therefore,  takes  a  great  risk, 
because  if  the  vessel  never  reaches  port  he  loses  the  entire  amount  of 
his  loan,  hence  maritime  loans  always  bear  a  very  high  rate  of  interest. 
These  loans  are  usually  made  payable  a  few  days  after  the  arrival  of  the 
vessel  at  the  end  of  her  voyage.  If  not  paid  according  to  the  terms  of 
the  bond,  the  lender  may  have  his  loan  enforced  by  due  process  of  law 
in  a  Court  of  Admiralty,  and  the  property  sold  to  satisfy  his  claim. 

One  peculiarity  of  bottomry  is  that  where  there  are  successive  bonds 
given,  they  must  be  paid  in  exactly  the  opposite  order  from  other  liens, 
that  is,  the  last  one  must  be  paid  first,  and  so  on  in  inverse  order.  The 
theory  of  this  is  that  the  last  loan  enables  the  ship  to  complete  the  voy- 
age, otherwise  she  would  have  been  lost,  and  the  capitalists  who  had 
taken  the  responsibilities  of  the  former  loan  or  loans,  would  have 
received  nothing,  hence  each  is  entitled  in  inverse  order  to  what 
remains  after  paying  the  later  loan  or  loans. 

General  Average. — Aside  from  the  freight  and  the  goods  con- 
signed, the  shipper  has  to  make  the  customary  payment  of  a  small  sum 
to  the  master  for  his  care  and  trouble,  called  primage.  He  must  also 
pay  charges  for  towage,  etc.,  and  demurrage,  which  has  been  already 
defined.  He  is,  however,  sometimes  called  upon  to  pay  another  charge 
growing  out  of  the  perils  of  navigation  known  as  general  avcr;ige. 
This  arises  when  it  becomes  necessary  to  sacrifice  some  part  of  the  ves- 
sel or  cargo  to  save  the  remainder.  It  is  only  equitable  in  such  cases 
that  the  property  saved  should  bear  a  proportionable  amount  of  the 
loss,  and  this  constitutes  general  average.  The  principle  embraces 
every  voluntary  sacrifice  to  save  property. 

It  covers  the  case  of  a  delivery  of  a  part  of  the  cargo  as  a  ransom  to 
pirates  or  an  enemy,  where  it  is  necessary  to  release  the  ship  and  bal- 
ance of  the  cargo.  It  also  includes  the  loss  caused  by  cutting  away 
masts  and  spars,  and  the  throwing  overboard  of  anchors,  chains,  etc., 
as  well  as  parts  of  the  cargo.  Not  every  sacrifice  of  property,  however, 
will  constitute  the  ground  for  general  average.  It  must  not  be  the 
result  of  sudden  impulse,  but  a  deliberate  act  resulting  from  an  exer- 
cise of  the  judgment.  Goods  tliat  are  heaviest  and  of  the  lowest  \alue 
should  be  thrown  overboard  first.  The  sacrifice  must  be,  (1)  neces- 
sary, (2)  voluntary,  (3)  successful,  that  is,  it  must  result  in  saving  the 
vessel  and  remainder  of  the  cargo. 

Mode  of  Adjusting  the  Loss. — The  general  rule  is  that  all  articles 
that  pay  freight  must  contribute,  and  the  ship's  owners  contribute 
according  to  the  value  of  the  vessel  at  the  end  of  her  voyage,  together 


124  SHIPPING. 

with  her  freight  and  earnings.  This  may  be  made  more  evident  by  an 
illustration.  Suppose  the  storm  by  which  we  have  assumed  the 
"Electric"  was  damaged  during  her  voyage  to  have  been  of  such 
severity  that  the  captain  was  obliged  to  throw  overboard  all  the 
shingles  shipped  by  Wilkins  &  Co.  The  vessel,  which  is  owned  by 
W.  H.  Fitch  &  Co.,  is  worth,  at  the  end  of  her  voyage,  $38,000,  and 
her  freight  earned  is  82,000,  making,  as  a  basis  for  the  owners'  contri- 
bution, 140,000 ;  Wilkins  &  Co.'s  shingles  are  worth  $8,000,  and  the 
remainder  of  the  cargo  comprises  the  goods  of  L.  L.  Stone,  worth 
120,000,  and  those  of  G.  B.  Miller,  worth  $12,000.  The  entire  value 
of  the  ship,  freight,  and  cargo  is  then  just  $80,000,  and  the  amount  of 
the  loss,  $8,000,  is  ten  per  cent  of  the  whole,  which  must  be  borne 
ratably  by  the  owners  and  shippers.  Fitch  &  Co.  must,  therefore, 
contribute  84,000,  Stone  $2,000,  and  Miller  $1,200,  making  $7,200, 
while  Wilkins  &  Co.  must  bear  the  remainder  of  the  loss,  namely : 
$800,  which  is  their  just  proportion. 

Salvag-e. — This  is  the  compensation  allowed  for  saving  property 
abandoned  at  sea.  We  have  seen  that  the  finder  of  a  lost  article  on 
land,  who  takes  and  returns  it  to  the  owner  is  not  usually  entitled  to 
any  payment  for  his  services,  but  the  compensation  for  such  services  at 
sea  is  very  large,  varying  according  to  the  circumstances,  and  amount- 
ing sometimes  to  half  or  more  of  the  entire  value  of  the  property  saved. 
The  right  to  it  is  not  confined  to  those  who  find  property  that  has  been 
absolutely  abandoned  at  sea,  but  rescuers  who  save  vessels  from  the 
perils  of  the  sea  or  from  the  enemy,  are  entitled  to  salvage.  Many  men 
along  the  coast,  sometimes  called  salvors,  engage  in  thus  rescuing 
property  as  a  business.  If  they  fail  they  are  entitled  to  nothing  for 
their  services,  while  if  they  succeed  the  law  allows  them  liberal  com- 
pensation out  of  the  property  saved.  Where  the  amount  of  salvage  is 
not  regulated  in  any  given  case  by  statute,  it  is  fixed  by  a  court  having 
admiralty  jurisdiction.  A  person  connected  as  seaman,  officer,  or  pilot 
with  the  ship  saved  or  the  cargo  of  which  is  rescued,  ordinarily  has  no 
right  to  salvage  because  he  is  hired  and  paid  for  his  services  in  that 
connection,  and  can  claim  no  pay  for  extra  exertion.  A  passenger  of 
the  vessel  may,  however,  become  entitled  to  salvage,  and  where  the  ship 
has  been  so  abandoned  or  captured  by  an  enemy  as  to  discharge  an 
officer  or  seaman  from  his  contract,  he  may  then  become  entitled  to 
salvage  like  any  other  salvor. 

Shipping-  and  Railroad  Transportation. — Since  the  enormous 
developments  of  railroad  facilities  the  term  shipping  has  become  to  be 
used  in  a  larger  sense,  and  is  now  frequently  applied  to  simple  railway 
transportation.     But  it  is  also  used  in  its  original  sense  in  connection 


SHIPPING.  125 

with  carriage  by  railroad,  because  some  of  the  gi-eat  railroad  corpora- 
tions have  steamshijD  connections  which  enable  them  to  receive  goods 
at  inland  stations  on  the  lines  of  their  roads  and  ship  them  direct  to 
a  foreign  port.  In  that  case  the  railroad  company  enters  into  an  agree- 
ment with  the  shipper  to  deliver  his  goods  at  their  destination.  This 
agreement  is  in  form  a  combination  of  a  railroad  freight  receipt  and 
a  bill  of  lading,  and  answers  the  purpose  of  both.  Three  or  more  of 
them  are  executed  in  each  instance  of  the  same  tenor,  and  these  are 
used  and  transferred  by  endorsement,  in  the  same  manner  as  the  bill 
of  lading. 

Tlie  Inter-state  Commerce  Law. — On  the  28d  day  of  March,  1887, 
there  went  into  effect  a  law  enacted  by  the  Congress  of  the  United 
States  known  as  the  Inter-state  Commerce  Law,  designed  to  regulate 
commerce  between  the  states.     Among  its  provisions  are  the  following: 

(1.)  That  it  shall  apply  to  all  states  and  territories  alike,  and  shall 
govern  the  traffic  of  all  common  carriers  alike,  whether  on  land  or 
water,  who  do  business  in  two  or  more  states  or  territories. 

(2.)  That  no  discrimination  shall  be  made  among  large  or  small, 
constant  or  occasional  shippers,  or  among  such  as  ship  articles  of 
greater  or  less  value;  that  no  charge  shall  be  unjust  or  unreasonable; 
that  proper  facilities  shall  be  given  at  termini  for  other  shippers  so  as  to 
avoid  delay,  and  that  ^jro  rata  charges  shall  govern  in  the  long  and  short 
hauls  alike;  and  all  pooling  of  freights  is  by  the  Law  declared  unlawful. 

(3.)  In  case  of  shipment  from  one  state  through  a  foreign  country  to 
another  state,  the  rate  must,  as  in  all  interstate  freighting,  be  made 
public;  and  if  this  provision  is  not  observed  for  such  foreign  passage, 
the  goods  so  shipped  can  only  re-enter  the  United  States  by  the  pay- 
ment thereon  of  usual  duties.  Besides  the  requirement  for  the  publi- 
cation of  rates,  the  law  requires  that  any  advance  shall  be  published  ten 
days  before  being  demanded,  while  reductions  in  rates  may  be  made 
without  notice,  but  the  fact  of  such  reduction  must  be  published  as 
soon  as  made. 

(4.)  All  schedules  of  rates  and  charges  must  be  filed  with  the  Com- 
missioners, together  with  all  contracts,  from  which  no  variation  with- 
out notice  can  be  made,  unless  subject  to  a  penalty  fixed  by  the  Law, 
and  enforceable  in  any  United  States  court.  In  determining  the  just- 
ness of  complaints  against  transportation  companies  the  Commission 
has  the  right  to  subpoena  witnesses  and  send  for  persons  and  papers,  and 
any  failure  to  comply  with  the  demands  of  the  commission  is  punishable 
as  a  contempt.  After  finding  complaint  to  be  just,  notice  is  given  the 
com.parfy  charged  with  injustice,  and  unless  reparation  be  made,  an  in- 
junction may  effectually  restrain  the  continuance  of  such  abuse. 


126  SHIPPING. 

(5.)  When  two  thousand  dollars  or  more  is  involved,  either  party- 
may  appeal  to  the  United  States  Supreme  Court. 

(6.)  The  Commission  may  require  all  corporations  of  certain  classes 
to  employ  a  uniform  system  of  bookkeeping  so  as  to  facilitate  examina- 
tions. The  Commission  reports  its  business  yearly  to  the  Secretary  of 
the  Interior. 

(7.)  The  object  of  the  Law  being  to  prevent  abuses,  provision  is  made 
for  its  being  carried  out.  Appointments  are  made  by  the  President  and 
expenses  are  paid  from  the  treasury  of  the  United  States. 

QUESTIONS. 

Define  shipping.  !N"ame  the  parties  to  the  contract  ?  In  what  way 
may  the  owner  of  a  vessel  hire  it  ?  What  is  a  charter  party  ?  What  is 
usually  set  forth  in  the  charter  party  ?  What  is  demurrage  ?  What  is 
a  chartered  ship  ?  general  ship  ?  bill  of  lading  ?  What  are  the  parties 
to  a  bill  of  lading  called  ?  What  use  is  made  of  the  bill  of  lading  ? 
How  does  the  transfer  of  the  bill  of  lading  affect  the  goods  shipped  ? 
How  are  bills  of  lading  transferred  ?  How  may  the  bill  be  endorsed? 
What  is  the  general  rule  of  liability  of  the  owner  or  charterer  of  a 
vessel?  What  is  meant  by  *' dangers  of  the  sea"?  How  may  the 
necessity  for  a  maritime  loan  arise  ?  Upon  what  property  must  the 
master  secure  his  loan  ?  What  is  a  bottomry  bond  ?  A  respondentia 
bond  ?  What  is  the  nature  of  these  loans  and  upon  what  does  their 
payment  depend  ?  What  is  said  of  interest  upon  maritime  loans  ? 
When  are  they  usually  made  payable  ?  In  case  of  nonpayment,  how 
must  the  creditor  proceed  to  satisfy  his  claim  ?  What  peculiarity  exists 
in  regard  to  payment  where  there  are  several  bottomry  bonds  secured 
by  the  same  vessel  ?  Upon  what  theory  is  this  based  ?  What  is  prim- 
age ?  What  is  general  average  ?  What  goods  must  be  first  sacrificed  ? 
What  must  characterize  this  sacrifice  to  compel  contribution  under 
general  average  ?  What  articles  must  contribute  in  general  average  ? 
How  is  the  loss  adjusted  ?  What  is  salvage  ?  How  is  the  amount  of 
salvage  fixed  where  it  is  not  regulated  by  statute  ?  Are  employees 
engaged  in  navigating  the  vessel  entitled  to  salvage  in  saving  the  cargo 
or  rescuing  the  ship  ?  Under  what  circumstances  may  they  be  entitled 
to  salvage  ?  How  has  the  use  of  the  term  shipping  been  recently 
enlarged  ?  What  is  the  Interstate  Commerce  Law  ?  What  scope  has 
it  ?  What  is  said  of  discriminations  ?  Of  pooling  freights  ?  With 
whom  must  schedules  be  filed  and  to  whom  must  carrying  companies 
report  ?  In  determining  the  justness  of  complaints  what  powers  are 
given  the  commissioners  ?  What  may  )ye  done  if  carrier  companies  on 
notice  do  not  repair  the  wrong  ? 


CHAPTER  XXVI. 


AGENCY. 


GENERAL    PRINCIPLES. 


Definition. — An  agent  is  any  person  who  is  employed  by  another  to 
do  any  act  for  the  employer's  benefit  or  account.  The  one  employing 
the  agent  is  called  the  principal,  and  the  business  relationshiiD  existing 
between  them  is  agency.  A  person  dealing  with  the  agent  is  termed  a 
third  party  or  third  person.  Any  one  may  be  a  principal  who  is  not 
under  any  of  the  disabilities  that  preclude  a  person  from  making  a  valid 
contract.  The  agent,  since  he  does  not  need  to  bind  himself,  may  be 
any  person  of  sufficient  understanding  to  transact  the  business  com- 
mitted to  his  charge.  An  infant,  though  unable  in  most  cases  to  bind 
himself  by  contract,  may  nevertheless,  if  properly  authorized,  bind  his 
principal  as  effectually  as  such  principal  could  bind  himself.  Agency 
is  one  of  the  largest  and  most  important  of  all  business  relations. 
Hence,  it  follows  that  the  law  of  agency,  or  principal  and  agent  as  it  is 
usually  called,  is  one  of  the  very  important  divisions  of  Commercial 
Law. 

How  Appointed. — An  agent  may  be  appointed  by  parol  to  do  all 
acts  and  mulve  all  contracts,  except  such  as  are  required  by  law  to  be 
executed  under  seal.  Agents  are  perhaps  more  frequently  appointed 
by  letter  or  orally ;  but  the  formal  way  of  constituting  an  agent  is  by 
power  of  attorney  executed  under  seal.  He  must  be  appointed  in  the 
latter  mode  in  order  to  be  authorized  to  convey  lands,  or  execute  any 
!      other  instrument  under  seal.     The  following  is  a  usual  form  of 

POWER  OF   ATTORNEY. 

^ttOW  hU  Pftt  t>a  ifxt^t  ^vemii^f  tJiat  I,  John  E.  Martin,  of  the  city 
of  Albany,  N.  Y.,  have  made,  constituted,  and  ap2mnted,  and  by  these 
presents  do  make,  constitute,  and  apjjoint,  Henry  W.  Barton,  of  the  city 
of  Chicago,  111,  my  tj'ue  and  lawful  attorney,  for  me  and  in  my  name, 
place,  and  stead,^  to  grant,  bargain  and  sell  all  my  real  estate  situate  in 
the  said  city  of  Chicago,  or  any  part  thereof,  for  such  price,  and  on  such 


128  AGENOT. 

terms,  as  to  him  shall  seem  best,  and  for  me,  and  in  my  name,  to  maTce, 
execute,  acknowledge  and  deliver  good  and  sufficient  deeds  and  conveycmces 
for  the  same,  either  with  or  ivithout  the  covenants  of  warranty,*  hereby 
giving  unto  my  said  attorney  full  power  to  do  everything  whatsoever 
requisite  and  necessary  to  he  done  in  the  premises,  as  fully  as  I  could  do 
if  personally  present,  with  full  pioiver  of  substitution  and  revocation, 
hereby  ratifying  and  confirming  all  that  my  said  attorney  or  his  substi- 
tute shall  lawfully  do  or  cause  to  be  done  by  virtue  hereof.  *• 

Ijn  %i'itUf,si,'Si  ^f  hereof,  /  have  hereunto  set  my  hand  and  seal  this  18th 
day  of  July  in  the  year  Nineteen  Hundred  and  One. 

John  E.  Maetin.         [Seal.] 
^tatc  Df  itfw  lorfe, 


ss 
County  of  Albany,  ' 

O71  this  18  th  day  of  July,  1901,  before  me,  the  subscriber,  per  socially 
appeared,  John  E.  Martin,  to  me  Jcnoiun  to  be  the  same  person  mentioned 
in  and  who  executed  the  foregoing  poioor  of  attorney,  and  he  then  and 
there  in  my  vresence  acknoivledged  the  same  to  be  his  free  act  and  deed. 

Samuel  J.  Paine, 

Notary  Public. 

Where  the  authority  conferred  is  to  execute  a  deed,  mortgage,  or  any 
other  instrument  that  is  to  be  recorded,  the  power  of  attorney  must  be 
itself  so  executed  as  to  entitle  it  to  be  recorded  at  the  same  place.  This 
requires  that  it  shall  be  acknowledged,  substantially,  as  in  the  forego- 
ing form,  that  is,  that  the  person  who  has  signed  the  paper  shall  go 
before  a  notary  jDublic  or  other  j)roper  officer,  as  a  justice  of  the  peace, 
a  judge,  commissioner  of  deeds,  &c.,  and  acknowledge  that  he  executed 
the  same  ;  or  in  some  of  the  states,  it  may  be  signed  by  a  witness  with 
an  affidavit  added  showing  that  it  was  properly  executed  in  the  pres- 
ence of  the  witness.  It  is  best  always  to  have  a  power  of  attorney 
acknowledged,  or  at  least  witnessed,  but  it  is  not  necessary  unless  it  is 
to  be  recorded. 

It  will  be  noticed  that  the  part  of  the  foregoing  form  included 
between  the  asterisks,  or  stars,  sets  forth  the  particular  act  or  business 
to  be  done  by  the  agent — selling  and  conveying  real  estate  in  this  case, — 
and,  therefore,  by  inserting  in  its  place  the  proper  words,  the  general 
form  may  be  adapted  to  almost  any  kind  of  business.  For  example,  if 
it  were  desired  to  authorize  the  agent  to  collect  debts  then  the  follow- 
ing might  be  thus  inserted  : 

To  ash,  demand,  sue  for,  collect,  receive  and  give  acquittance  for  all 
sums  of  mo7iey,  debts  and  demands,  whatsoever,  which  are  or  shall  be 


GENERAL   PRINCIPLES.  129 

owing  me  ly  any  fjcrson  or  jjersons  residing,  or  being  at,  the  said  city  of 
Chicago. 

Authority,  how  Proved. — Where  there  is  a  power  of  attorney,  let- 
ter, or  other  writing,  by  which  the  agent  was  appointed,  his  powers  will 
be  determined  by  it.  In  some  cases  his  authority  may  be  proved  by 
circumstances  or  by  the  conduct  of  the  principal.  By  allowing  another 
to  hold  himself  out  to  the  world  as  his  agent,  the  principal  adopts  his 
acts  and  will  be  held  bound  to  the  person  who  thereafter  gives  credit 
to  the  other  in  the  capacity  of  his  agent ;  for  example,  where  one 
repeatedly  sends  his  servant  to  a  store  to  buy  goods  on  credit,  he  will 
be  responsible  to  the  merchant  for  goods  afterwards  bought  by  the  ser- 
vant without  his  authority,  if  the  want  of  authority  is  unknown  to  the 
merchant. 

Divisions. — Agency  is  divided  into  two  branches,  general  and  special. 
Under  the  former  the  agent  is  called  a  general  agent,  and  under  the 
latter  a  special  agent. 

A  General  Agent  is  one  who  is  authorized  to  transact  all  his 
principal's  business  in  a  particular  line.  The  authority  of  a  general 
agent  is  determined  by  the  usual  extent  of  his  employment — by  the 
authority  generally  held  by  general  agents  in  that  particular  line  of 
business — and  also  by  his  acts  done  with  the  knowledge  of  his  principal. 
The  acts  of  a  general  agent  while  acting  within  the  general  scope  of  his 
authority,  will  bind  his  principal  whether  in  accordance  with  his  private 
instructions  or  not.  The  public,  or  third  persons,  are  not  bound  to 
inquire  into  the  private  instructions  which  he  may  have  received  from 
his  principal. 

Where  an  agent  acts  fraudulently,  and  some  one  must  be  the  loser  by 
his  deceit  or  fraudulent  conduct,  it  is  just  that  he  who  employs  and 
reposes  confidence  in  him  should  be  the  loser  rather  than  a  stranger. 
A  teller  of  a  bank  who  certifies  the  checks  of  customers  with  the  knowl- 
edge of  the  officers  of  the  bank  exercises  a  general  authority.  He  is  a 
general  agent  of  the  bank  for  that  purpose,  and  if  he  frji-udulently  cer- 
tifies the  check  of  a  customer  witliout  funds,  the  bank  is  liable  to  one 
who  takes  the  check  in  good  faith. 

A  Special  Ag-ent  is  one  who  is  appointed  for  a  special  purpose,  and 
is  clothed  with  a  limited  authority.  His  acts  do  not  bind  his  principal 
beyond  the  scope  of  such  authority;  for  example,  where  an  agent  is 
authorized  to  sign  a  note  payable  in  six  months,  and  he  signs  one  payable 
in  sixty  days,  such  note  will  be  void.  Hence  a  person  who  deals  with  a 
special  agent  should  be  sure  that  such  agent  acts  within  the  precise  limits 
of  his  authority,  otherwise  the  principal  will  not  be  bound.  If,  however, 
the  agent  follows  strictly  the  line  of  his  authority  as  it  is  shown  to  the 


130  AGENCY. 

public,  his  principal  will  be  bound,  notwithstanding  he  may  have  given 
his  agent  private  instructions  still  further  limiting  his  special  powers. 
Within  the  scope  of  the  business  intrusted  to  him,  whether  that  busi- 
ness be  general  or  limited,  the  acts  and  representations  of  an  agent  will 
bind  his  principal. 

Implied  Powers. — An  agent  has  certain  incidental  powers  which 
are  implied  from  the  circumstances,  that  is,  they  are  not  stated  in  exact 
terms,  but  are  understood.  Where  he  is  authorized  to  sell  goods,  he 
may  do  so  on  a  reasonable  credit  if  such  goods  are  usually  sold  on  credit. 
An  authority  to  sell  personal  property,  which  is  commonly  or  often  sold 
with  a  warranty,  enables  the  agent  to  bind  his  principal  by  a  warranty. 
An  authority  to  sell  goods,  that  are  intrusted  to  the  possession  of  an 
agent,  includes  a  power  to  receive  payment ;  a  general  power  to  buy 
goods  will  authorize  an  agent  without  money  to  buy  on  credit.  The  fact 
that  an  agent  is  authorized  by  his  principal  to  sell  certain  real  estate, 
and  that  it  is  the  custom  of  the  locality  to  make  such  sales  through 
brokers,  authorizes  the  agent  to  employ  a  broker  to  negotiate  the  sale. 

Notice  to  Agent. — The  agent  represents  the  principal  in  his  busi- 
ness, and  the  principal  is  deemed  to  have  notice  of  whatever  is  commu- 
nicated to  his  agent.  The  principal  is  also  supposed  to  have  knowledge 
of 'the  acts  of  his  agent,  done  in  the  execution  of  his  authority.  For 
example,  he  is  presumed  to  have  notice  of  a  contract  made  by  a  sub- 
agent  appointed  by  a  general  agent,  who  had  power  to  make  such 
appointment.  It  is  also  a  rule  of  law  that  notice  to  the  principal  is 
notice  to  the  agent. 

Dissolution. — The  agency  may  be  terminated  or  dissolved  m  the 
following  ways,  viz. :  (1)  by  limitation,  (2)  by  the  direct  act  of  the 
parties,  (3)  by  change  in  the  condition  of  the  parties. 

By  Limitation. — Where  there  is  a  limit  to  the  continuance  of  the 
relation  between  the  parties,  and  that  limit  has  been  reached,  the  agency 
is  said  to  have  expired  by  limitation.  In  case  the  power  or  authority  is 
given  for  a  certain  time,  the  expiration  of  this  period  will  terminate  the 
agency.  Where  the  particular  business  for  which  the  agency  was  con- 
stituted has  been  completed,  as  where  the  agent  is  authorized  to  sell  a 
span  of  horses,  or  purchase  a  house  and  lot,  such  completion  will 
terminate  the  agency. 

By  Direct  Act  of  the  Parties. — Either  party  may  terminate  the 
agency  under  certain  conditions.  The  principal  may  revoke,  that  is, 
recall  the  authority  given  to  the  agent  at  pleasure,  provided  the  author- 
ity remains  unexecuted,  but  the  moment  it  is  executed  it  becomes  the 
principal's  contract  and  is  beyond  recall;  for  example,  where  an  agent  is 
authorized  to  sell  property,  the  principal  may  revoke  the  authority  up  to 


GENERAL    PRINCIPLES.  131 

the  time  the  sale  is  actually  made,  not  after.  The  revocation  of  the 
authority  of  an  agent  reaches  through  him  to  all  his  sub-agents,  and 
terminates  their  authority  also.  Revocation  takes  effect  as  against  the 
a^ent  and  his  sub-agents  from  the  time  they  have  notice  of  it,  and  as 
to  third  parties,  from  the  time  it  is  made  known  to  them.  The  agent's 
authority  may  be  absolutely  revoked  by  notice  to  him  from  his  princi- 
pal; but  one  who  has  dealt  with  the  agent  has  a  right  to  assume,  unless 
otherwise  informed,  that  the  agency  continues,  and  the  principal  is  bound 
by  his  agent's  dealings,  unless  the  person  with  whom  he  is  dealing  has 
had  actual  notice  of  the  dissolution.  No  special  form  of  revocation  is 
necessary.  Where  the  power  was  given  under  seal,  it  may  be  recalled  by 
a  writing  not  under  seal,  or  orally;  or  it  may  even  be  implied  from  the 
acts  of  the  principal.  These  rules  in  regard  to  the  right  of  revocation 
by  a  principal  do  not  apply  where  the  agent  has  a  personal  interest  in 
the  property  or  business.  The  agent  may  terminate  his  employment 
by  renouncing  his  authority.  This  may  be  done  at  any  time,  and  the 
agent  is  bound  to  give  notice  of  it  to  his  principal.  Unless,  however, 
the  agreement  provides  for  such  renunciation  at  pleasure,  the  agent 
will  make  himself  liable  to  his  principal  for  any  resulting  damages. 

By  Change  in  Condition  of  Parties. — Any  change  in  the  condition 
of  the  principal  which  renders  him  incompetent  to  contract,  or  in  the 
condition  of  the  agent  which  renders  him  incompetent  to  do  the  busi- 
ness for  which  he  was  engaged,  will  dissolve  the  agency.  The  princi- 
pal changes  which  will  have  this  effect  are  as  follows  :  (1)  bankruptcy; 
(2)  incompetency;  (3)  marriage;  (4)  death. 

Bankruptcy. — In  general,  the  bankruptcy  of  either  party  terminates 
the  agency.  If  the  principal  becomes  a  bankrupt,  his  property  passes 
out  of  his  hands,  and  hence  he  would  be  incapable  of  carrying  out  any 
agreement  in  regard  to  it.  But,  as  in  the  case  of  revocation,  the  rule 
that  bankruptcy  of  the  principal  terminates  the  agency  does  not  apply 
where  the  agent  has  an  interest  in  the  business.  The  bankruptcy  of  the 
agent  terminates  his  authority  at  once,  except  to  do  some  formal  act  not 
involving  the  transfer  of  any  interest ;  as,  for  example,  to  execute  a 
deed  of  property  already  sold.  By  bankruptcy  is  here  meant  not  mere 
inability  to  pay  one's  debts  but  a  technical  case  of  bankruptcy  where 
the  party  has  been  declared  a  bankrupt  by  a  court  of  bankruptcy. 

Incompetency. — Where  the  principal  becomes  incompetent  to  make 
a  valid  contract,  as  by  reason  of  insanity,  it  terminates  the  agency;  but 
generally  this  can  be  determined  only  by  legal  proceedings  to  establish 
the  fact  of  such  insanity.  The  incompetency  of  the  agent  will  also 
work  the  dissolution  of  the  agency.  This  may  result  from  insanity,  or 
from  any  other  cause  that  renders  him  incapable  of  transacting  his 
principal's  business. 


132  AGE2SCY. 

Marriage. — Under  the  common  law,  where  a  single  woman  was 
principal,  her  marriage  dissolved  the  agency  because  it  suspended  her 
power  to  contract.  In  like  manner,  under  the  common  law,  the  mar- 
riage of  the  agent,  who  was  a  single  woman  when  appointed,  had  the 
same  effect.  She  might  be  reappointed,  however,  under  the  changed 
conditions,  since  a  married  woman  could  be  an  agent,  though  not  being 
capable  of  contracting,  she  could  not  be  the  principal.  These  lust  rules 
have  been  so  much  changed  by  the  statutes  of  the  different  states,  modi- 
fying or  removing  the  disabilities  of  married  women,  that  reference  must 
be  had,  in  any  given  case,  to  the  laws  of  the  state  in  which  it  arises. 

Death. — The  death  of  either  party  terminates  the  agency.  The 
authority  of  an  agent  is  a  personal  trust  and  will  not  pass  by  operation 
of  law  to  his  heirs  or  personal  representatives,  but  expires  with  him. 
The  death  of  the  principal  terminates  the  agency,  because,  as  in  the 
case  of  his  bankruptcy  his  property  passes  immediately  into  the  hands 
of  others,  and  because  further,  as  an  agent's  acts  must  be  the  acts  of 
his  principal  his  power  is  gone,  since  a  dead  man  can  do  no  act.  On 
this  theory  such  termination  of  the  agency  has  been  settled  by  the  com- 
mon law  as  dating  from  the  time  of  the  principal's  death,  and  not  from 
the  date  when  notice  of  it  is  given  to  the  agent  or  third  parties. 

QUESTIONS. 

Define  agent;  principal.  What  is  agency?  Who  are  third  persons, 
or  parties?  Who  may  be  a  principal?  Who  an  agent?  How  may  an 
agent  be  appointed?  How  are  agents  usually  appointed,  and  what  is 
the  formal  way  of  appointing  them  ?  When  must  an  agent  be  appoint- 
ed in  the  latter  way?  What  is  an  acknowledgment,  and  when  is  it  nec- 
essary in  the  case  of  a  power  of  attorney?  How  is  an  agent's  author- 
ity proved  where  it  is  written  ?  when  oral  ?  When  may  the  princi- 
pal's conduct  establish  the  agency?  How  is  agency  divided?  Define 
general  agent.  What  is  his  authority?  How  affected  by  private 
instructions,  and  why?  Define  special  agent.  How  far  does  his  acts 
bin(J  his  principal?  When  do  the  agent's  representations  bind  his  prin- 
cipal? What  are  implied  powers?  What  is  a  person  dealing  with  an 
agent  bound  to  know?  What  is  the  rule  as  to  notice  to  the  agent? 
With  what  knowledge  is  the  principal  chargeable?  What  is  the  rule  as 
to  notice  to  the  princii^al ?  In  what  ways  may  an  agency  be  terminated? 
What  is  meant  by  saying  that  the  agency  has  expired  by  limitation? 
What  by  express  limitation?  What  by  implied  limitation?  What  is 
the  second  way?  How  and  when  may  the  principal  terminate  the 
agency?  When  does  it  take  effect  as  to  the  agent?  As  to  third 
parties?     What  is  the  rule  in  regard  t.o  form  of  revocation?    How 


GENERAL    PRINCIPLES.  133 

applied?  What  exception  is  there  to  the  principal's  right  of  revo- 
cation? How  and  when  may  the  agent  terminate  the  agency?  What 
liability  may  he  incur?  What  is  the  third  way?  Why  dues  bankruptcy 
of  the  principal  terminate  the  contract?  What  exception  is  there  to 
the  general  rule?  What  may  the  agent  do  after  he  becomes  a  bankrupt? 
What  is  the  second  changed  condition  that  will  terminate  the  agency? 
What  incompetency  of  the  agent  will  terminate  the  agency?  What 
is  the  third  changed  condition  terminating  an  agency?  What  is  the 
fourth  changed  condition?  From  what  time  does  such  termination 
date? 


CHAPTEE  XXVII. 


AGENCY. 


LIABILITY   OF    PARTIES. 


Liability  of  Principal. — Under  the  contract  of  agency  the  principal 
becomes  liable  in  two  ways;  (1)  he  is  liable  to  the  third  parties  for  the 
acts  of  the  agent,  and  (2)  he  is  liable  to  the  agent  for  the  fulfillment  of 
his  agreement.  The  liability  of  the  principal  to  third  parties  arises  in 
three  ways,  viz. :  (1)  under  the  contract;  (2)  for  the  wrongful  act  of  the 
agent,  and  (3)  by  the  subsequent  ratification  of  an  unauthorized  act. 

Under  the  Contract. — Where  the  principal  authorizes  an  agent  to 
make  a  purchase  in  his  name,  and  he  does  so,  the  contract  is  that  of 
the  principal,  and  he  only  is  liable  for  the  purchase  price.  In  general, 
the  principal  must  be  responsible  for  all  his  agent's  acts  done  within 
the  scope  of  his  authority,  and  this  is  the  rule,  even  though  the  prin- 
cipal be  unknown  at  the  time  to  the  third  person  with  whom  the  agent 
has  dealings.  Although  the  principal  may  have  given  his  agent  private 
instructions  limiting  his  power  to  less  than  his  apparent  authority,  it 
will  not  relieve  the  principal  from  liability  when  the  agent  violates  such 
instructions,  provided  the  jDcrson  with  whom  he  is  dealing  has  no 
knowledge  of  such  special  instructions. 

For  "Wron^ul  Act  of  Agent. — When  an  agent  acts  wrongfully  and 
negligently  in  the  business  intrusted  to  him,  the  principal  is  liable. 
Where  a  servant  sent  by  his  employer  to  remove  snow  and  ice  from  a 
roof,  does  it  in  such  a  careless  manner  as  to  injure  a  person  in  the 
street  below,  the  principal  is  liable  for  the  damages;  and  this  is  so  even 
though  the  agent  employed  a  stranger  to  do  the  work  for  him.  The 
principal  is  also  responsible  for  the  unskillfulness  of  his  agent.  Where 
a  city,  by  its  agents,  unskillfully  constructs  a  faulty  and  insufiicient 
culvert,  it  thereby  becomes  liable  for  resulting  damages.  K  the  agent 
commits  a  fraud  in  the  regular  transaction  of  his  principal's  business, 
the  principal  is  liable  for  it,  though  it  was  done  without  his  authority. 
But  where  an  agent  commits  a  willful  act  of  trespass  not  within  the 
scope  of  his  authority,  he  alone  is  liable — he  does  not  bind  his  prin- 

134 


LIABILITY    OF   PAKTIES.  135 

cipal.  If  a  servant  willfull)^  drives  his  master's  carriage  in  such  a  man- 
ner as  to  injure  persons  or  property,  he  alone  is  liable,  provided  it  was 
done  without  the  consent  of  the  principal.  The  willfulness  of  the  act 
relieves  the  principal. 

Ratification. — Though  the  act  of  an  agent  be  wholly  unauthorized, 
yet  it  may  be  ratified  by  the  principal  so  as  to  bind  him  from  the  begin- 
ning.    If  an  agent  reports  what  he  has  done  with  some  appearance  of 
authority,  the  silence  of  his  principal  may  be  considered  a  ratification 
when  the  principal  is  reasonably  bound  to  speak.    When  the  principal, 
with  knowledge  of  what  has  been  done  in  his  name  without  authority, 
consents  to  be  bound  by  it,  the  act  becomes  binding  the  same  as  if  the 
agent  had  been  authorized  in  the  beginning.     But  the  ratification  of 
the  unauthorized  act,  in  order  to  bind  the  principal,  must  be  made 
with  a  full  knowledge  of  all  the  material  facts.     Eatification  under  a 
misrepresentation  or  misunderstanding  of  the  actual  facts  of  the  case 
will  not  bind  the  principal.     Eatification  of  an  agent's  acts  will  be  pre- 
sumed unless  the  principal,  when  he  has  knowledge  of  such  acts,  expres- 
ses his  dissent  within  a  reasonable  time.     The  principal  may  ratify  his 
agent's  unauthorized  acts  by  express  words,  but  it  more  commonly 
results  from  his  accepting  the  act  by  receiving  the  benefit  or  proceeds 
of  it.     He  cannot,  however,  claim  the  benefit  of  the  agency  in  part  only 
and  reject  it  as  to  the  residue.     By  adopting  a  part  of  the  act  he 
becomes  bound  for  the  whole. 

Liability  to  Agent. —  The  principal  is  liable  in  general  to  his 
agent  for  the  fulfillment  of  his  agreement,  the  most  important  part  of 
which  usually  is  to  pay  him  the  compensation  for  his  services  to  which 
he  is  entitled  under  the  contract  between  them.  Where  the  agent  in 
the  course  of  his  employment  has  been  obliged  to  advance  money  for  the 
payment  of  proper  expenses  or  for  other  legitimate  purposes,  the  prin- 
cipal is  liable  for  the  repayment  to  him  of  such  advances,  and  usually 
with  interest  upon  the  same.  The  principal  is  further  liable  to  the 
agent  for  any  damages  he  may  have  suffered,  without  fault  on  his  part, 
in  following  the  principal's  instructions. 

Liability  of  Agent. — The  agent's  liabilities  arise  in  two  ways;  (1) 
he  is  liable  to  his  principal  for  a  failure  to  properly  perform  his  duties; 
and,  (2)  under  certain  circumstances,  he  is  liable  to  third  parties.  The 
rule  of  law  is  that  where  an  agent  acts  with  authority  in  a  lawful  man- 
ner, he  is  not  personally  liable  to  third  persons  for  his  acts  although, 
as  we  shall  see,  there  are  exceptions  to  this  rule.  But  where  the  agent 
acts  fraudulently  or  unlawfully,  he  is  responsible  to  third  parties,  and 
he  sometimes  becomes  liable  to  them  under  his  contract. 
Where  lie  Acts  Fraudulently  or  Unlawfully.— It  is  a  principle  of 


136  ,  AGENCY. 

law  that  no  one  can  confer  upon  another  authority  to  commit  a  fraud 
or  to  do  an  unlawful  act.  Hence  no  agent  can  avoid  liability  for  such 
wrongful  act  by  showing  that  he  did  it  for  his  principal  and  by  his 
authority;  and  therefore  the  agent  is  himself  responsible.  He  is  not, 
however,  liable  as  an  agent,  but  as  a  wrong  doer. 

Under  the  Contract. — An  agent  is  liable  to  third  parties  when 
the  form  of  his  agreement  with  them  or  the  general  course  of  dealing, 
imposes  such  liability  upon  him.  This  occurs  in  the  following  cases, 
viz. :  (1)  where  the  agent  specially  agrees  to  be  responsible;  (2)  where 
the  principal  is  unknown;  (3)  where  the  agent  exceeds  his  authority; 
(4)  where  there  is  no  responsible  principal;  and  (5)  where  certain 
classes  of  agents  are  generally  held  liable. 

Agreement. — As  a  matter  of  course,  when  the  agent,  being  a  person 
capable  of  contracting,  agrees  to  be  personally  responsible,  he  is  liable 
as  he  would  be  under  any  other  lawful  contract,  and  must  see  that  his 
principal  carries  out  the  agreement  made  on  his  behalf,  or  fulfill  it 
himself. 

Unknown  Principal. — Where  the  principal  is  not  known,  the  agent 
is  liable  because  the  credit  is  given  to  him,  or  the  transaction,  what- 
ever it  may  be,  is  entered  into  by  the  other  party  on  the  faith  of  his 
responsibility.  It  is  immaterial  whether  he  professes  to  be  acting  for 
himself,  or  claims  to  represent  some  principal  whom  he  does  not  dis- 
close; the  same  rule  of  responsibility  applies  and  the  same  reason  for 
its  application  exists  in  either  case.  When,  however,  the  principal  is 
discovered,  he  is  also  liable  to  the  third  party,  but  this  in  no  wise  relieves 
the  agent  from  his  liability. 

Exceeding  Authority. — An  agent  is  presumed  to  know  the  extent 
of  his  authority  better  than  any  third  Jjarty,  and  hence  if  he  exceeds 
that  authority,  while  he  may  not  bind  his  principal,  he  does  become 
liable  himself,  even  though  he  innocently  supposed  his  authority  broad 
enough  to  cover  the  transaction. 

No  Responsible  Principal. — Ordinarily  where  a  person  assumes  to 
contract  as  an  agent,  without  a  responsible  principal  against  whom 
creditors  may  proceed,  he  is  himself  liable.  For  example,  at  a  public 
meeting  to  arrange  for  the  celebration  of  the  completion  of  the  Erie 
Canal,  three  men  were  appointed  a  committee  of  arrangements,  who 
afterwards  employed  a  man  to  build  a  boat  to  be  carried  in  the  proces- 
sion, and  the  members  of  such  committee  were  held  liable  for  the  cost 
of  the  boat. 

Custom. — The  master  of  a  ship  is  the  agent  of  the  owner  and  is 
known  as  such,  yet  he  is  liable  personally  upon  all  contracts  for  supplies 
and  for  repairs  to  the  ship.     Agents  and  factors  who  represent  prin' 


LIABILITY   OF   PARTIES.   '  137 

cipals  residing  iu  foreign  countries  are  held  personally  liable  on  all 
contracts  made  by  them,  whether  the  fact  of  their  agency  is  mentioned 
in  the  contract  or  not.  The  presumption  in  such  cases  is,  that  the 
principal  being  so  far  away  the  credit  is  given  to  the  agent. 

Liabilities  to  Principal. — The  agent  is  bound,  in  general,  to  follow 
his  instructions  so  long  as  they  are  within  the  limits  of  legality,  but  he 
need  not  do  any  unlawful  act  at  his  principal's  bidding.  He  owes  it  as 
a  duty  to  his  principal  to  exercise  such  diligence  as  the  nature  of  the 
business  requires;  to  keep  him  fully  informed  in  regard  to  all  matters 
relating  to  or  connected  with  the  business;  to  give  his  personal  atten- 
tion to  it;  to  keep  and  render  proper  accounts  of  his  transactions;  and 
to  keep  the  goods  or  property  of  his  principal  with  the  same  care  and 
attention  that  a  prudent  man  would  bestow  upon  his  own.  A  failure 
on  the  part  of  the  agent  to  properly  perform  all  these  duties,  will  render 
him  liable  to  his  principal  for  whatever  damages  may  result  from  such 
failure.  In  the  absence  of  instructions  he  must  follow  in  his  transac- 
tions such  established  customs  and  usages  of  trade  as  may  exist  in  rela- 
tion to  the  particular  business  in  which  he  is  engaged.  It  is  the  duty 
of  an  agent  to  act  for  the  interests  of  his  principal  with  all  his  skill  and 
ability,  and  he  cannot  do  this  where  he  owes  a  divided  duty;  hence  in 
any  transaction  an  agent  cannot  act  for  both  parties,  unless  he  is  known 
by  both  parties  to  be  so  acting.  If  he  acts  for  both  parties  in  making 
a  contract  without  their  knowledge,  neither  of  them  will  be  bound  by 
it.  He  must  not  have  any  interests  adverse  to  his  principal,  and  hence 
he  cannot  act  as  both  buyer  and  seller.  If  an  agent  in  any  way  by  vio- 
lating his  agency  obligations  makes  any  gain  his  principal  is  entitled 
to  it,  but  if  he  suffers  any  loss  he  must  himself  bear  it.  An  agent  is 
also  liable  to  his  principal  for  any  loss  or  damage  resulting  from  his 
wrongful  acts. 

QUESTIONS. 

In  how  many  ways  does  the  principal's  liability  arise?  What  are  they? 
What  is  the  rule  as  to  the  responsibility  of  the  principal  when  he  is 
unknown?  What  is  the  effect  where  the  agent  violat'^s  his  private  instruc- 
tions? What  is  said  of  the  principal's  liability  for  nis  agent's  wrongful 
acts?  for  an  agent's  negligence?  for  unskillfulness?  for  fraud?  for  will- 
ful trespass?  Give  an  illustration  of  each?  How  may  the  principal 
become  bound  by  the  unauthorized  act  of  his  agent  ?  What  is  ratifica- 
tion ?  What  presumption  exists  in  regard  to  the  ratification  of  an 
agent's  acts  ?  What  is  the  rule  in  reference  to  ])artial  ratification  ? 
In  what  way  does  this  liability  arise  ?  What  is  said  of  tlie  principal's 
liability  to  the  agent  ?     What  is  the  rule  of  law  in  reference  to  the  lia- 


138  AGENCY. 

bility  of  agents  to  third  parties  ?  What  are  the  exceptions  ?  In  what 
character  is  the  agent  responsible  where  he  acts  wrongfully  ?  State  the 
second  exception  fully  ?  Under  what  conditions  may  the  liability 
arise  ?  What  is  the  second  condition  ?  On  what  ground  is  the  agent 
liable  when  the  principal  is  unknown  ?  What  effect  has  the  discovery 
of  the  principal  ?  Give  the  third  condition  ?  Upon  what  presumption 
is  it  based  ?  What  is  the  fourth  condition  ?  Give  an  illustration  ? 
What  is  the  fifth  condition  ?  Give  an  illustration  ?  What  is  said  of 
the  agent's  liability  to  the  principal  ? 


CHAPTER  XXYIII. 


PARTNERSHIP. 


FORMATION   AND   DIVISIONS. 


Definition. — Partnership  is  the  relationship  resulting  from  an  agree- 
ment between  two  or  more  persons,  to  place  their  money,  effects,  labor 
and  skill,  or  some  or  all  of  them,  in  some  enterjsrise  or  business,  and 
to  divide  the  profits  and  bear  the  losses  in  certain  proportions.  Such  a 
joint  undertaking  constitutes  a  j^artnership,  or  what  is  the  same  thing, 
a  copartnership.  The  partners  are  sometimes  referred  to  collectively 
as  a  house,  but  more  commonly  as  a  firm.  Partnerships  may  be  general, 
or  limited. 

How  Formed. —  Partnerships  are  formed,  as  the  above  definition 
indicates,  by  agreement  or  contract  of  the  parties;  but  this  agreement 
is  often  partly,  and  sometimes  wholly,  implied.  Hence  partnerships  may 
be  said  to  be  formed  by  one  of  the  following  means:  (1)  By  a  written 
contract,  under  seal  or  not  under  seal;  (2)  by  an  oral  agreement;  (3) 
by  implication. 

By  Written  Contract. — In  the  formation  of  a  copartnership,  espe- 
cially if  the  amount  involved  is  large,  the  business  complicated,  or  the 
duration  of  the  partnership  is  to  be  long,  the  contract  should  be  in  writ- 
ing; and  great  care  should  be  taken,  as  indeed  in  the  case  of  every  other 
contract,  that  the  writing  exjoresses  all  of  the  agreement.  The  written 
agreement  is  generally  called  Articles  of  Copartnership.  It  is  some- 
times executed  under  seal. 

The  following  is  a  form  for  a  copartnership  agreement  between 
merchants: 

ARTICLES    OF   AGREEME]SrT. 

^tticlcji  ot  '^^Xttmtnt,  made  the  third  day  of  March,  one  thousand  nine 
hundred  and  one,  between  Edgar  M.  Bond,  of  Troy,  N.  Y. ,  of  the  first 
part,  and  Louis  N.  Chapin,  of  Albany,  N.  Y.,  of  the  second  part,  wit- 

nesseth  asfolloios: 

139 


140  PARTNERSHIP. 

/.  The  parties  above  named  have  agreed  to  become  copartners  in  busi- 
ness, and  by  these  presents  do  agree  to  be  copartners  together  under  and  by 
the  firm  name  of  Bond  S  Chopin,  in  the  business  of  merchants  and  dealers 
in  dry  goods,  at  the  said  city  of  Albany,  the  partnership  to  commence  on 
the  first  day  of  April,  1901,  and  to  continue  five  years. 

II.  To  that  end  and  purpose  the  said  party  of  the  first  part  has  con- 
tributed the  sum  of  twenty  thousand  dollars  in  cash,  and  the  said  party  of 
tJie  second  part  has  contributed  the  lease  of  the  store  No.  195  Main  Street, 
in  the  said  city  of  Albany,  to  be  occupied  by  them,  and  also  Ms  stock  of 
goods  and  the  good-will  of  the  bicsiness  heretofore  carried  on  by  him,  which 
are  together  estimated  and  valued  by  the  parties  at  the  like  sum  of  twenty 
thousand  dollars,  the  capital  stock  so  formed  to  be  used  and  employed  in 
common  between  them,  for  the  support  and  management  of  the  said  busi- 
ness to  their  mutual  benefit  and  advantage. 

III.  At  all  times  during  the  continuance  of  their  copartnership  they 
and  each  of  them  will  give  their  attendance,  and  do  their  and  each  of  their 
best  endeavors,  and  to  the  utmost  of  their  skill  and  power  exert  themselves 
for  their  joint  interest,  pirqfit,  benefit  and  advantage,  and  truly  employ, 
buy,  sell  and  merchandise  ivith  their  joint  stock  and  the  increase  thereof 
in  the  business  aforesaid,  and  also  that  they  shall  and  will  at  all  titnes 
duri7ig  the  said  copartnership  bear,  pay  and  discharge  equally  between 
them  all  rents  and  exjjenscs  that  may  be  required  for  the  management  and 
support  of  said  business ;  and  that  all  gains,  jjrofits  and  increase  that 
shall  come,  groio  or  arise  from  or  by  means  of  their  said  business  shall  be 
equally  divided,  and  all  losses  by  ill  commodities,  bad  debts  or  otherwise, 
shall  be  borne  and  paid  between  them  equally. 

IV.  And  it  is  agreed  by  and  betiveen  the  said  parties  that  there  shall 
be  had  and  kept  at  all  times  during  the  continuance  of  their  copartner- 
ship, perfect,  just  and  true  books  of  account,  ivherein  each  of  the  said 
partners  shall  enter  and  set  doivn  all  money  by  him  received,  paid,  laid 
out  and  expended  in  and  about  the  said  business;  all  goods,  loares,  com- 
modities and  merchandise  by  him  bought  or  sold  by  reason  or  on  account 
of  the  said  business;  and  all  other  matters  and  things  whatsoever  to  the 
said  business  a7id  the  management  thereof  i7i  anywise  belongitig;  which 
said  books  shall  be  used  iti  common  betiveen  the  said  copartners,  so  that 
either  of  them  may  have  access  thereto,  without  any  interruption  or  hin- 
drance of  the  other.  And  also  each  copartner,  once  in  each  year,  or 
oftener  if  necessary,  shall  make,  yield  and  render,  to  the  other,  a  true, 
just  and  perfect  inventory  and  account  of  all  profits  and  increase  by  him 
made,  and' of  all  losses  by  him  sustai?ied;  and  also  all payme7its,  receipts, 
disbursements,  and  all  other  things  by  him   made,  received,  disbu7'sed, 


FORMATION   AND    DIVISIONS. 


141 


acted,  done  or  suffered  in  said  coj) art ner ship  and  lusiness  ;  and  the  said 
accounts  having  been  made,  each  partner  shall  clear,  adjust,  pay  and  de- 
liver, to  the  other,  at  the  time,  his  just  share  of  the  profits,  and  pay  and 
bear  his  just  share  of  the  expenses  and  losses  so  made  as  aforesaid. 

V.  And  the  said  parties  hereby  mutually  covenant  and  agree,  to  and 
with  each  other,  that  during  the  continuance  of  the  said  copartnership 
neither  of  them  shallindorse  any  note,  or  otherwise  become  surety  for  any 
person  or  persons  whomsoever,  without  the  consent  of  the  other  of  said 
copartners.  And  at  the  determination  of  their  copartnership  the  said 
copartners,  each  to  the  other,  shall  make  a  just  and  final  account  of  all 
things  relating  to  their  said  business,  and  iii  all  things  truly  adjust  the 
same;  and  all  and  every,  the  stock  and  stocks,  as  well  as  the  gains  and 
increase  thereof,  which  shall  appear  to  be  remaining,  either  in  money, 
goods,  wares,  fixtures,  debts  or  otherwise,  shall  be  divided  equally  between 

them. 

******** 

f  n  WxiWt^i  ^^hftrof,  the  parties  hereto  have  hereunto  set  their  hands 
and  seals,  in  diqilicate,  the  day  and  year  first  above  written. 

EDGAR  3£.   BOND         {seal.^ 
LOUIS  N.    CHAP  IN      [seal.'] 

Signed,  sealed  and  delivered  in  the  presence  of 

C.  I R VINO  Jones,  Albany,  N.  Y. 

Additional  Provisions. — Although  these  articles  of  copartnership 
are  supposed  to  constitute  the  agreement  between  two  persons  about  to 
begin  a  mercantile  business,  yet  with  slight  changes,  that  would  readily 
suggest  themselves,  this  form  could  be  adapted  to  very  many  other  kinds 
of  business,  and  varied  to  conform  to  the  number  of  partners.  There 
are,  however,  a  number  of  other  general  provisions,  which  may  be  in- 
serted in  place  of  the  asterisks,  provided  the  agreement  of  the  parties 
includes  the  points  thus  covered.  One  of  these  fixes  the  limit  of  the 
amount  to  be  drawn  out  by  a  partner  and  may  be  as  follows: 

Each  of  the  parties  may  draw  from  the  cash  of  the  joint  stock  the  sum 
of  SIX  hundred  dollars  quarterly,  to  his  oiun  use,  the  same  to  be  charged  in 
account,  and  neither  of  them  shall  take  any  furtlier  sum  for  his  oiun  sep- 
arate use,  without  the  consent  of  the  other  in  writing  ;  and  any  such  fur- 
ther sum  taken  luith  such  consent  shall  draiu  interest  at  the  rate  of  six  per 
cent,  per  annum,  and  shall  be  payable,  together  with  the  interest  due, 
within  twenty  days  after  notice  in  loriting  given  by  the  other  party  re- 
quiring such  pay  merit. 


142  PARTifEBSHIP. 

Another  provides  what  particular  part  of  the  firm  business  shall  be 
done  or  managed  by  the  different  partners.  For  the  foregoing  articles 
of  copartnership  such  a  provision  might  read  as  follows,  and  could  be 
modified  to  suit  other  conditions  or  different  kinds  of  business  as  occa- 
sion required: 

The  said  party  of  the  first  part  shall  devote  his  time  to  the  management 
of  the  hooks  and  finances  of  said  firm,  and  the  purchasing  and  imjwrting 
of  goods  necessary  to  the  said  business  ;  and  the  said  party  of  the  second 
fart  shall  devote  and  give  all  his  time  and  attention  to  the  business  of  the 
said  firm  as  a  salesman,  and  generally  in  the  care  and  superintendence  of 
the  store ;  and  no  debt  shall  be  contracted  for  more  than  $5,000,  and  no 
credit  given  for  more  than  $500  by  either  of  said  parties  without  the  con- 
sent of  the  other. 

Still  another  provision  relates  to  the  dissolution  of  the  copartnership 
and  may  be  as  follows: 

In  case  of  the  violation  of  any  of  the  foregoing  covenants  and  obligations 
by  either  of  the  parties  hereto,  the  other  party  may  at  his  option  dissolve 
this  copart7iership  by  giving  the  other  party  written  notice  of  his  election 
so  to  do,  within  teyi  days  after  being  informed  of  such  violation.  After 
the  expiration  of  the  first  two  years  of  said  copartnership  either  party  may 
dissolve  the  partnership,  at  his  electioti,  by  giving  three  7nonths'  previous 
notice  in  ivriting  to  the  other  partner,  of  his  intention  so  to  do. 

Other  provisions,  sometimes  used,  stipulate  for  a  reference  of  disputes 
to  arbitration;  for  an  off'er  to  be  made  upon  dissolution  by  any  partner 
to  buy  or  sell  at  a  price  he  may  name,  which  the  other  partner  or  part- 
ners must  accept  within  a  given  time;  for  a  sale  at  auction,  of  the  assets, 
in  case  the  parties  cannot  agree  upon  a  division  at  the  expiration  of  the 
copartnership;  and  also  that  after  dissolution  the  retiring  partner  shall 
not  carry  on  the  same  trade  or  business  within  a  certain  number  of  miles 
of  the  location  of  the  firm  business. 

By  Oral  Agreement. — But  there  is  no  necessity  for  a  written  con- 
tract in  order  to  constitute  a  partnership.  Very  many  partnerships  are 
formed  by  oral  agreement.  The  proposed  partners  simply  meet,  talk 
over  the  project  and  come  to  an  understanding  which  constitutes  the 
partnership  agreement;  but  very  often  the  terms  of  this  agreement  are 
vague  and  only  cover  part  of  the  conditions.  In  such  cases  the  law  pre- 
scribes rules  by  which  their  respective  rights  are  to  be  determined  in  all 
matters  not  included  in  the  agreement.  As  to  the  parties  themselves, 
the  law  will  recognize  them  as  partners. 


FORMATION   AND   DIVISIONS.  143 

By  ImplicatioD. — The  parties  may  so  conduct  themselves  that  the 
law  will  presume  the  existence  of  a  copartnership  between  them, 
whether  they  intended  it  or  not,  and  hold  them  responsible  as  partners, 
to  third  parties.  There  is,  however,  a  distinction  between  (1)  an 
actual  partnership  by  implication,  and  (3)  a  partnership  by  implication 
as  to  third  parties. 

(1)  Occasionally  persons  engage  in  business  together  without  any 
agreement,  under  such  circumstances  that  an  actual  partnership  is 
formed ;  for  example,  a  merchant  in  Boston  requests  a  merchant  in 
New  Orleans  to  purchase  and  send  him  a  certain  number  of  bales  of 
cotton  for  sale  on  their  joint  account,  and  the  request  being  acted  upon, 
the  two  become  partners  in  the  adventure.  The  cotton  being  bought 
and  disposed  of  each  becomes  liable  as  a  partner  for  the  full  amount  of 
any  obligation  that  may  arise  out  of  the  transaction.  But  since  there 
can  be  no  actual  partnership  that  does  not  arise  out  of  a  contract 
between  tl:^  parties,  the  law  in  such  cases  implies  the  agreement. 

(2)  Should  a  person  who  is  not  a  partner,  or  even  interested  in  a 
particular  partnership,  so  conduct  himself  as  to  make  others  believe 
him  to  be  a  partner,  and  thus  induce  them  to  give  credit  to  the  firm, 
on  the  strength  of  his  responsibility,  he  would  become  liable  as  a  part- 
ner though  not  such  in  fact.  In  other  words  the  law  implies  a  partner- 
ship between  him  and  the  other  members  of  the  firm  for  the  benefit  of 
third  parties. 

liimited  Partnership  is  a  species  of  partnership  which  can  only  be 
formed  in  pursuance  of  a  statute  authorizing  such,  and  is  possible 
only  in  those  states  where  special  statutes  have  been  enacted  allowing 
their  formation.  The  chief  feature  which  distinguishes  a  limited  part- 
nership from  a  general  partnership,  is  the  limited  liability  of  one  or 
more  of  the  partners.  In  a  general  partnership,  each  partner  is  liable 
for  all  of  the  debts  of  the  firm,  even  if  these  debts  exceed  his  interest 
in  the  business.  In  a  limited  partnership,  by  provision  of  the  statutes 
under  which  they  are  formed,  the  liability  of  one  or  more  of  the  part- 
ners is  limited  to  the  amount  of  the  capital  actually  contributed  by 
them.  The  names  of  the  limited  partners  do  not  generally  appear  in 
the  firm  name.  That  is  composed  of  those  partners  who  are  held  out 
to  the  world  as  the  real,  ostensible  partners,  and  who  are  the  active  busi- 
ness partners,  with  unlimited  liability. 

Formation. — The  provisions  of  tlie  statute  relating  to  the  formation 
of  limited  partnerships  must  be  strictly  followed,  or  the  firm  will  be 
treated  as  an  ordinary  partnership.  The  statutes  of  those  states  which 
have  provided  for  such  partnerships  have  a  general  similarity.     The 


144  PAHTNERSHIP, 

persons  proposing  to  form  such  a  partnership  make  and  sign  a  certifi- 
cate or  agreement  which  is  properly  executed  and  filed  with  the  public 
records  of  the  county  in  which  the  business  is  to  be  transacted.  This 
certificate  states  the  name  of  the  firm  and  nature  of  its  business, 
together  with  the  names  of  the  partners,  and  the  amount  of  capital 
contributed  by  each.  In  some  states  it  is  necessary  to  publish  in  a 
newspaper  the  terms  of  the  partnership. 

The  Finn  Name. — The  name  of  the  firm  is  usually  fixed  by  the 
articles  of  copartnership,  but  this  is  not  necessarily  the  case.  The  firm 
may  bind  themselves  by  any  name  they  may  adopt,  and  the  name  that 
they  actually  use  in  their  business  transactions  will  be  considered  their 
firm  name.  They  may  carry  on  the  firm  business  in  the  individual 
name  of  one  of  the  partners,  or  they  may  adopt  a  name  that  does  not 
include  the  name  of  any  of  the  partners.  For  example,  the  firm  name 
in  the  form  given  above  may  be  made  ''Edgar  M.  Bond,"  or  "Bond 
&  Co.,"  or  "  The  Hudson  Mercantile  Co.,"  or  any  other  name  the  par- 
ties might  agree  upon.  There  are  some  restrictions  imposed  by  state 
statutes  by  which  it  is  made  unlawful,  among  other  things,  to  use  the 
name  of  one  Avho  is  not  interested  in  the  firm,  or  to  use  "  &  Co."  where 
it  represents  no  one. 

QUESTIONS. 

Define  partnership.  How  are  partners  referred  to  collectively  ? 
How  are  partnerships  formed  ?  What  is  the  written  agreement  usually 
called  ?  What  additional  provision  is  sometimes  inserted  ?  Name  a 
second.  And  a  third.  What  other  provisions  may  be  inserted  ?  How 
otherwise  are  partnerships  formed  ?  How  may  a  partnership  arise  by 
implication  ?  Give  an  illustration.  What  is  a  limited  partnership  ? 
How  formed  ?    How  is  the  firm  name  fixed  ?     What  may  it  be  ? 


\  \/if^i^l 


P-^'-K.' 


/A/ 


../ 


CHAPTEE  XXIX. 


PARTNERSHIP. 


PARTNERS. 


Kinds. — As  we  have  seen,  a  partnership  results  from  or  grows  out  of 
a  contract,  and  therefore  only  sucli  persons  as  are  competent  to  contract 
can  become  partners.  For  the  same  reason  no  one  can  become  a  part- 
ner against  the  wish  of  the  others,  because  another  of  the  necessary 
conditions  of  the  contract  would  be  wanting,  viz.,  assent.  Partners  are 
of  four  classes  and  are  distinguished  as  follows:  (1)  Real  or  ostensible, 
(2)  dormant  or  concealed,  (3)  limited,  and  (4)  nominal. 

The  Real  or  Ostensible  Partner  is  one  who  appears  to  the  world 
to  be  and  actually  is  a  partner,  and  enjoys  the  benefits  and  assumes  the 
risks  of  the  position. 

Dormant  or  Concealed  Partner. — It  sometimes  happens  that  a 
person  invests  money  or  capital  Jointly  with  one  or  more  other  persons 
in  some  business  adventure,  and  at  the  same  time  keeps  the  fact  of  his 
connection  with  the  enterprise  a  secret.  This  makes  him  a  dormant  or 
concealed  partner.  Of  course  his  name  does  not  appear  in  the  firm 
name  or  in  any  other  manner  in  their  business.  This  is  done  to  avoid 
the  risk  and  responsibility  of  an  ostensible  partner,  and  so  long  as  the 
concealment  is  perfect  he  escapes  liability  to  the  firm  creditors.  He  is, 
however,  in  fact  a  real  partner,  and  the  moment  a  creditor  of  the  firm 
ascertains  his  connection  with  it,  he  may  sue  and  recover  from  him  the 
same  as  from  any  other  partner;  and  the  fact  that  the  creditor  did  not 
trust  the  firm  on  the  strength  of  his  relationship  with  it  is  not  ma- 
terial, for  his  liability  to  third  parties  is  based  upon  the  contract  with 
his  copartners. 

Tlie  liiniited  Partner  exists  only  in  states  where  the  statutes  pro- 
vide for  the  formation  of  limited  partnerships.  Such  a  partner,  by 
complying  with  the  requirements  of  the  statute,  may  contribute  any 
certain  amount  agreed  upon  to  the  partnership  capital,  and  his  risk 
extends  only  to  the  loss  of  the  sum  so  invested.  His  liability  is  thus 
iU  145 


146  PAETNERSHIP. 

limited,  and  none  of  the  debts  of  the  partnership  can  be  collected  from 
him. 

Nominal  Partner. — As  we  have  seen,  a  person  may  make  himself 
liable  to  third  parties  as  a  partner  when  in  fact  he  has  no  interest  in 
the  firm.  This  makes  him  a  nominal  partner.  He  places  himself  in 
that  position  by  such  conduct  as  may  reasonably  lead  others  to  suppose 
he  is  a  partner,  and  induce  them  to  trust  the  firm  on  the  belief  in  his 
responsibility. 

Power. — Each  partner  is  a  general  agent  of  the  firm  within  the 
scope  of  the  partnership  business.  His  power  to  bind  the  firm  by  his 
acts  is  confined  strictly  within  the  limits  of  the  partnership  business, 
and  where  it  embraces  some  particular  line  only,  a  partner  cannot 
bind  his  copartners  in  any  transaction  outside  of  their  special  line  of 
business.  If,  for  example,  after  forming  their  copartnership  for  mer- 
cantile business,  Mr.  Chapin  should  think  there  was  a  good  chance  for 
the  firm  to  make  money  in  speculating  in  real  estate,  and  without  his 
copai'tner's  knowledge  should  sign  the  firm  name  to  a  contract  for  the 
purchase  of  a  number  of  lots,  the  firm  would  not  be  bound.  Being  in 
trade,  he  may  bind  the  firm  by  contracts  of  purchase  and  sale,  and  in 
all  contracts  that,  according  to  the  general  course  of  dealing,  have  refer- 
ence to  the  business  transacted  by  the  firm.  Outside  of  that  he  cannot. 
A  partner  may  receive  payment  of  the  debts;  and  he  may  compromise 
and  discharge  debts  due  to  the  firm;  he  may  begin  legal  proceedings  in 
the  name  of  the  firm,  and  represent  the  firm  in  all  matters  arising  in 
the  course  of  the  litigation;  he  may  bind  the  firm  by  a  misrepresenta- 
tion in  the  sale  or  purchase  of  property. 

In  the  case  of  a  partnership  for  a  general  business,  each  partner  has 
the  right  to  make,  accept,  or  endorse  negotiable  paper  for  the  firm.  It 
is  one  of  the  incidents  of  the  business,  and  it  will  always  be  presumed 
that  it  is  done  on  the  partnership  account.  Hence  the  firm  will  be 
liable  for  money  borrowed  in  its  name  by  one  partner,  although  he  should 
immediately  appropriate  it  to  his  individual  use.  But  if  the  person 
loaning  such  partner  the  money  knew  it  was  not  to  be  used  for  partner- 
ship purposes,  he  could  not  hold  the  firm  for  the  indebtedness. 

Limitations  of  Power. — Two  rules  have  been  laid  down  covering 
specific  acts  that  a  partner  can  not  do.  They  are  designed  to  protect 
the  firm  against  the  misappropriation  of  its  credit,  and  may  be  stated 
as  follows:  (1)  A  partner  cannot  use  the  property  or  credit  of  the  firm 
for  his  individual  benefit;  and  he  cannot  bind  the  firm  by  giving  its 
note  or  delivering  its  property  in  payment  of  his  individual  debt.  (3) 
A  partner  cannot  bind  a  firm  by  a  contract  of  surety  or  guaranty 


PARTISTERS.  14e7 

unless  it  is  shown  that  the  other  partners  assented  to  the  act.  As  in  all 
cases  of  restricted  powers  of  a  partner,  these  rules  do  not  apply  where 
the  other  partners  consent  to  the  transaction  or  adopt  it  after  it  has 
been  entered  into.  Their  consent  makes  it  their  joint  act;  and  this 
consent  may  be  proved  by  showing  that  they  have  been  accustomed  to 
do  the  same  thing. 

Agreements  Between  Partners. — In  forming  a  partnership,  the 
parties  may  agree  upon  any  plan  of  operation  they  may  choose.  They 
may  agree  upon  the  duties  that  each  shall  perform,  as  is  shown  in  the 
form  of  articles  of  copartnership  already  given,  and  upon  the  consent 
necessary  in  making  debts  and  giving  credit.  Between  themselves 
these  provisions  are  binding;  but  they  are  not  so  as  to  third  parties 
dealing  with  the  firm,  without  knowledge  of  their  existence.  Part- 
ners cannot  limit  their  liability  to  third  parties  by  any  agreement  they 
may  make  among  themselves,  because  the  public  is  not  presumed  to 
have  notice  of  the  actual  relation  existing  between  them,  and  there- 
fore cannot  be  bound  by  it.  Hence  persons  dealing  with  the  firm  have 
a  right  to  consider  the  members  as  ordinary  partners. 

As  between  the  partners  these  private  agreements  are  valid,  and 
where  one  partner  acts  contrary  to  any  such  private  contract,  he  is 
liable  to  his  copartner  for  the  damages  resulting  from  such  breach. 
The  remedy  of  the  other  partners  against  one  who  breaks  his  agreement 
depends  upon  circumstances.  If  actual  damages  can  be  proved  they 
can,  of  course,  be  recovered  from  a  partner  the  same  as  from  any  one 
else.  When  a  partner  engages  in  another  business,  and  uses  the  part- 
nership funds  in  carrying  it  on,  contrary  to  their  copartnership  agree- 
ment, the  other  partners  may,  if  they  choose,  have  such  new  business 
and  its  profits  treated  as  belonging  to  the  firm. 

Community  of  Profits. — The  most  important  condition  of  the 
formation  of  a  copartnership  is  the  sharing  of  profits  by  the  partners. 
No  partnership  can  arise  unless  the  element  of  profit  is  present,  and 
there  is  a  sharing  of  such  profits;  hence  this  sharing  of  profits  has 
been  laid  down,  as  the  first  test  in  determining  whether  or  not  a  part- 
nership actually  exists  in  any  given  case.  But  here  again  arises  a  dis- 
tinction. While  it  is  true  that  every  actual  partner  must  share  m  the 
profits,  it  is  not  true  that  every  one  who  shares  in  the  profits  is  a 
partner.  A  person  does  not  become  a  partner  in  a  business  from  the 
mere  fact  that  he  is  to  receive  as  a  compensation  for  his  services  a  share 
of  the  profits,  when  he  has  no  interest  or  property  in  the  capital,  and 
acts  under  orders — when  in  fact  he  is  merely  a  clerk  or  agent  When- 
erer  a  party  has  contracted  for  a  share  of  the  profits,  as  profits,  so  as  to 


148  PARTNERSHIP. 

entitle  him  to  an  accounting  and  a  proprietary  interest  in  the  profits, 
he  is  a  partner;  but  when  he  has  agreed  for  a  remuneration  in  propor- 
tion to  the  profits,  or  out  of  the  profits,  without  any  interest  in  the 
capital  stock  or  credits,  then  he  is  not  a  partner.  Where  there  is  no 
agreement  showing  how  the  profits  shall  be  divided,  the  presumption  is 
that  they  are  to  be  divided  equally,  but  it  is  a  very  common  thing  for 
the  articles  of  copartnership  to  provide  for  a  different  division. 

Ownership  of  Capital. — In  the  form  of  articles  of  copartnership 
given,  one  partner  contributes  money  only  while  the  other  puts  in  his 
stock  of  goods,  lease  of  store,  and  good-will  of  the  business,  and  these 
at  once  become  the  joint  property  of  both  partners,  and  constitute  the 
capital  of  the  partnership.  But  it  is  not  always  the  case  that  the 
partners  are  such  joint  owners  of  the  capital  stock,  although  the  pre- 
sumption is  in  all  partnerships  that  the  partners  contribute  towards 
the  capital.  It  often  happens,  however,  that  the  contribution  of  one 
partner  consists  of  his  labor,  skill  or  experience  in  conducting  some 
particular  branch  of  business,  while  the  other  partner  or  partners  fur- 
nish the  money  or  property  required  in  the  joint  undertaking.  In  that 
case  it  is  commonly  said  that  one  puts  in  his  skill  and  experience 
against  the  money  or  jDroperty  of  the  other.  Nor  is  it  necessary  when 
each  partner  contributes  a  portion  of  the  actual  capital  that  the  same 
should  become  the  joint  property  of  the  firm.  In  the  form  given,  the 
partners,  each  of  whom  perhaps  owns  a  span  of  horses,  might  agree  to 
put  them  in  for  the  use  of  the  firm,  in  addition  to  the  other  capital 
agreed  to  be  contributed,  though  retaining  their  individual  ownership 
of  the  animals. 

Sharing  of  Losses. — Although  it  is  usually  agreed  in  the  formation 
of  a  partnership  that  both  profits  and  losses  shall  be  sliared,  it  may  be 
agreed  that  one  partner  shall  have  his  share  of  the  profits  and  not  be 
liable  for  the  losses,  and  this  agreement  will  be  binding  between  the 
partners.  They  may  make  any  agreement  among  themselves  that  they 
please.  But  no  such  agreement  will  prevent  a  partner  from  being  liable 
for  the  debts  of  the  partnership,  unless  the  creditor  knew  of  this  agree- 
ment between  the  partners  when  the  debt  was  contracted. 

liiability. — The  theory  of  the  law  of  partnership  is  that  every  act  of 
a  partner  is  the  act  of  the  firm,  and  every  obligation  incurred  by  one 
member  of  the  firm  becomes  the  obligation  of  each.  In  a  general  part- 
nership each  partner  is  individually  liable  for  all  the  debts  of  the  firm. 
If  the  property  of  the  firm  is  not  sufficient  to  pay  its  debts,  then  the 
private  property  of  a  member  may  be  taken  to  satisfy  the  claims  of  the 
creditors  of  the  firm.  As  we  have  seen,  Limited  partners  are  only  liable 
for  the  amount  of  their  share  of  the  firm  property. 


PARTKEES.  149 

Suits  ac  Law. — Although  partnerships,  in  a  certain  sense,  are  con- 
sidered and  do  business  in  the  firm  name  as  a  single  individual,  they 
are  not  so  considered  to  the  extent  that  they  can  sue  or  be  sued  as  an 
individual.  A  partnership  has  the  power  to  bring  a  suit  but  such  suit 
must  be  brought,  not  in  tbe  firm  name,  but  in  the  name  of  all  the  in- 
dividuals composing  it.  So  if  a  person  desires  to  bring  suit  against  a 
partnership  he  must  sue  the  individuals  together  that  compose  it. 

QUESTIONS. 

Who  may  enter  into  a  partnership  ?  What  classes  of  partners  are 
there  ?  Define  each  ?  What  power  has  a  partner  over  the  partnership 
business  ?  What  can  lie  not  do  ?  What  is  said  of  agreements  between 
the  partners  ?  What  is  said  of  community  of  profits  ?  of  ownership  of 
capital  ?  of  sharing  of  losses  ?  Give  the  liability  of  general  partners 
for  the  firm's  debts?    How  may  a  firm  sue  and  be  saed? 


CHAPTER  XXX. 


PARTNERSHIP. 


DISSOLUTION. 


Duration. — The  duration  of  a  copartnership  is  entirely  a  matter 
of  agreement,  if  the  parties  choose  to  make  it  so.  Hence  if  a  limit  is 
fixed  for  its  duration  it  will  be  presumed  to  continue  until  such  period 
has  elapsed.  In  case  the  partnership  is  formed  for  some  particular  en- 
terprise, then  its  duration  will  be  implied  until  the  particular  business 
for  which  it  was  formed  is  finished.  Where  no  time  is  fixed  either  by 
agreement  or  implication,  then  the  partnership  will  be  presumed  to 
continue  at  the  pleasure  of  the  parties,  and  either  one  may  dissolve  it 
by  notice  at  any  moment.  In  the  absence  of  such  notice,  it  may  con- 
tinue during  the  lives  of  the  partners,  but  the  law  will  not  presume  in 
any  case  its  longer  continuance. 

Dissolution  of  a  partnership  can  be  had  only  in  some  legal  way, 
for  some  legal  cause.  The  conditions  warranting  a  legal  dissolution 
or  termination  of  a  partnership  may,  for  convenience  of  discussion,  be 
grouped  under  four  general  heads.  A  dissolution  may  take  place  (1) 
by  agreement  of  all  the  partners  ;  (2)  by  act  of  one  of  the  partners ; 
(3)  by  a  decree  of  a  court ;  (4)  by  operation  of  law. 

Dissolution  by  Ag-reement  of  all  the  partners  is  the  common 
method  of  terminating  a  partnership.  Having  formed  the  partnership 
of  their  own  choice,  they  are  naturally  entitled  to  terminate  it  as  freely 
as  they  formed  it.  The  consent  to  its  termination  must  be  on  the  part 
of  all  the  partners,  or  it  cannot  be  dissolved  by  agreement.  The  dis- 
solution of  a  partnership  by  agreement  may  be  accomplished  in  three 
ways:  (1)  by  agreement  in  the  contract  or  articles  of  copartnership; 
(2)  by  an  agreement  subsequently  entered  into  ;  and  (3)  by  an  implied 
agreement. 

In  the  Contract. — It  is  usual,  whenever  formal  articles  of  copartner- 
ship are  prepared,  to  insert  a  clause  specifying  the  duration  of  the  part- 
nership.    At  the  expiration  of  the  specified  period,  the  partnership  is 

150 


DISSOLUTION. 


151 


terminated  and  dissolved  without  further  formality.  Even  if  the  part- 
nership contract  is  not  reduced  to  writing,  the  partners  usually  have  an 
understanding  as  to  how  long  it  is  to  continue,  and  where  this  is  the 
case  the  dissolution  is  accomplished  at  the  expiration  of  the  time  unless 
it  is  continued  by  agreement. 

Subsequent  Agreement. — When  no  time  for  dissolution  is  fixed 
upon  at  the  formation  of  the  partnership,  the  partners  may  subse- 
quently agree  upon  a  time,  and  if  the  time  was  fixed  in  the  contract 
forming  the  partnership  it  may  be  altered  by  subsequent  agreement. 

Implied  Agreement. — When  the  partnership  is  formed  for  the 
transaction  of  some  particular  business,  there  is  an  implied  agreement, 
in  the  absence  of  an  express  agreement,  that  the  partnership  shall  end 
when  the  entire  business  is  completed.  Upon  the  accomplishment  of 
the  business,  a  dissolution  occurs  without  any  formal  act  of  the  parties. 
And  moreover,  the  business  of  the  partnership  may  have  to  do  with 
some  definite  subject  matter  ;  as,  the  working  of  a  mine.  If  the  mine 
were  swallowed  up  by  the  sea  and  wholly  destroyed,  the  partnership 
would  end  though  no  express  agreement  to  that  efl:ect  were  made. 

Act  of  a  Partner. — While  the  mere  desire  of  one  partner,  without 
the  consent  of  the  other,  will  not  work  a  dissolution,  yet  one  partner 
by  affirmative  act,  may  dissolve  the  partnership.  He  may  do  this  by 
assigning  all  his  interest,  or  by  renouncing  the  contract  in  some 
affirmative  way. 

Assignment  of  Interest. — If  one  partner  sells,  or  in  any  other  way 
transfers,  or  assigns,  his  interest  in  the  business,  dissolution  is  the 
immediate  result,  for  the  remaining  partners  are  not  bound  to  accept 
the  purchaser  as  a  partner  in  place  of  the  one  who  assigned  his  interest, 
nor  is  the  purchaser  bound  to  become  a  partner.  He  is  the  owner  of 
an  undivided  interest  in  the  partnership  property  in  common  with  the 
others,  and  can  demand  that  the  partnership  affairs  be  immediately 
closed  up  and  he  be  paid  his  purchased  interest. 

Renunciation.— When  no  time  for  the  duration  of  the  partnership  has 
been  agreed  upon,  it  is  called  a  partnership  at  will,  and  one  or  more  of 
the  partners  may  dissolve  it  at  pleasure  by  express  renunciation.  There 
is  said  to  be  a  dissolution  by  tacit  renunciation  when  one  partner 
withdraws  from  participation  in  the  business  and  engages  in  other 
affairs,  or  refuses  to  act  with  his  copartners,  or  does  some  affirmative 
act  inconsistent  with  the  partnership  agreement.  But  if  he  takes  cither 
of  these  courses  before  the  expiration  of  the  period  fixed  for  the  duration 
of  the  partnership,  in  case  a  period  has  been  agreed  upon,  he  makes 
himself  liable  to  his  copartners  for  damages  which  they  may  suffer  by 
his  breach  of  contract. 


153  PAETNERSHIP, 

Decree  of  a  Court  is  the  third  general  method  of  dissolving  a  part- 
nership. It  is  the  course  generally  resorted  to  by  one  or  more  partners 
in  case  of  a  quarrel  or  disagreement,  and  an  amicable  dissolution  and 
settlement  of  the  affairs  of  the  firm  cannot  be  had. 

Grounds  for  a  Decree. — There  are  certain  well  recognized  causes 
for  which  a  court  of  equity  will  decree  a  dissolution  of  partnership. 
The  most  important  of  these  are  as  follows:  (1)  Improper  and  fraud- 
ulent conduct  on  the  part  of  one  or  more  of  the  partners;  (2)  such  a 
violation  of  the  articles  of  partnership  as  would  defeat  the  purposes 
and  objects  of  the  firm;  (3)  the  exclusion  of  a  partner  from  his  just 
share  in  the  management  of  the  business  of  the  firm;  (4)  continued 
quarreling  between  partners,  rendering  the  successful  prosecution  of 
the  business  impracticable;  (5)  intemperance,  dissipation  or  gross  im- 
morality of  one  of  the  partners,  such  as  to  impair  the  credit  of  the  firm 
or  injure  its  business;  (6)  inability  of  a  partner  by  reason  of  perman- 
ent illness,  or  from  any  cause  to  perform  his  part  of  the  contract. 

Operation  of  Law. — This  is  the  fourth  and  last  of  the  general  heads 
under  which  the  circumstances  causing  or  authorizing  the  dissolution 
of  a  partnership  are  grouped.  By  operation  of  law  is  meant  that  when 
the  facts  or  events  which  we  shall  jDroceed  to  mention,  exist  or  happen, 
then  a  dissolution  of  the  partnership  legally  results,  without  any  affirm- 
ative act  by  cither  of  the  partners. 

What  Events  Operate  as  a  Dissolution. — A  partnership  is  imme- 
diately dissolved  by  operation  of  law  :  (1)  Upon  the  death  of  a  partner. 
(2)  Upon  one  of  the  partners  becoming  insane  or  imbecile.  (3)  Upon 
the  marriage  of  a  female  partner,  since  by  the  common  law  all  her  prop- 
ertv  and  interests  were  transferred  to  her  husband, and  she  could  no  longer 
continue  in  business;  but  this  doctrine  lias  been  so  generally  abrogated 
by  statute  as  to  do  away  practically  with  this  cause  of  dissolution.  (4) 
Upon  the  sale  of  a  partner's  interest  upon  execution  issued  against  his 
property.  (5)  Upon  the  bankruptcy  of  a  partner,  as  thereupon  his 
intei-est  in  the  partnership  is  supposed  to  have  become  vested  in  his 
creditors.  (6)  Upon  the  breaking  out  of  war  between  the  different 
countries  where  the  partners  reside,  and  between  which  they  carry  on 
business.  They  are  then  alien  enemies  and  cannot  contract  with  each 
other.  (7)  And  finally  upon  the  happening  of  any  event  which  severs  the 
unity  of  interest,  which  the  law  presumes  to  exist  between  partners. 

Results  of  Dissolution. — Immediately  on  dissolution  of  the  part- 
nership the  relations  of  the  parties  as  partners  are  at  an  end,  and  the 
rule  is  that  one  partner  cannot  by  any  act  bind  the  firm,  as  to  any  new 
transaction;  but  this  supposes  that  the  person  with  whom  the  transaction 


DISSOLUTION.  158 

occurs  knows  of  the  dissolution.  It  follows,  therefore,  that  notice  of  the 
dissolution  should  be  given.  It  is  usual  to  mail  a  circular  notice  to  all 
persons  with  whom  the  firm  has  dealings,  and  also  to  insert  a  notice  of 
dissolution  in  the  advertising  columns  of  one  of  the  local  newspapers, 
so  as  to  inform  the  general  public,  although  it  is  not  necessary  to  give 
notice  of  the  dissolution  to  those  who  have  had  no  dealings  with  the 
firm.  The  following  is  a  convenient  form  for  giving  notice  of  the 
dissolution: 

NOTICE    OF   DISSOLUTION. 

Notice  is  hereby  given  that  the  copartnership  heretofore  existing  under 
the  firm  name  of  Martin  &  Bly,  at  Chicago,  III.,  is  this  day  dissolved. 
All  accounts  due  the  firm  are  to  he  paid  to  Myron  T.  Bly,  and  all  liahiU 
ities  should  he  presented  to  him  for  payment. 

Dated  Chicago,  III.,  Aiigiist  16,  1901.  Prtor  F.  Martin, 

Myron  T.  Bly. 

This  notice  may  be  sent  to  persons  with  whom  the  firm  has  been 
doing  business,  or  it  may  be  published  in  a  paper,  or  both. 

Powers  of  tlie  Partners  After  Dissolution. — The  only  powers  of 
the  partners  after  dissolution,  relate  to  the  winding  up  of  the  affairs  of 
the  firm,  and  are  sometimes  termed  powers  in  liquidation.  For  the 
purpose  of  liquidating  the  affairs  of  the  firm,  and  securing  the  individual 
rights  of  the  partners  in  the  assets,  the  partnership  may  be  said  to  con- 
tinue. When  a  partnership  is  dissolved  by  consent,  it  is  customary  to 
appoint  one  of  the  partners  to  collect  the  outstanding  accounts,  and 
discharge  the  liabilities.  In  the  absence  of  such  appointment,  either 
of  the  partners  may  collect  debts,  settle  and  adjust  accounts,  and  pay 
creditors.  Each  has  a  right  to  have  the  partnership  assets  first  applied 
toward  the  firm  liability  before  any  sharing  or  division  among  them- 
selves is  made.  If  tliere  should  be  a  surplus  after  the  liabilities  are 
discharged,  then  each  is  entitled  to  his  share,  to  be  estimated  according 
to  the  provisions  of  the  agreement,  or  in  the  absence  of  the  agreement, 
according  to  the  amount  of  capital  which  he  contributed. 

QUESTIONS. 

How  may  a  partnership  be  dissolved  ?  What  is  a  dissolution  by 
agreement  ?  How  may  it  be  expressed  ?  What  is  said  of  its  expression 
in  the  contract  ?  What  is  said  of  subsequent  agreement  ?  Of  implied 
agreement  ?    What  is  said  of  dissolution  by  act  of  a  partner  ?     What 


164  PARTNERSHIP. 

acts  will  work  a  dissolution  ?  What  is  said  of  dissolution  by  decree  of 
court  ?  What  are  the  grounds  for  such  a  decree  ?  What  is  a  dissolu- 
tion by  operation  of  law  ?  What  events  operate  as  a  dissolution  ? 
What  is  said  of  notice  of  dissolution  ?  How  is  it  given  ?  Why  and  to 
whom  ?  What  power  has  a  partner  after  dissolution  ?  How  is  the  firm's 
business  settled  up? 


CHAPTER  XXXI. 


JOINT-STOCK    COMPANIES. 


Definition. — Joint-stock  companies  are  associations  formed  for  the 
transaction  of  various  kinds  of  business.  Tliey  are  in  fact  partnerships, 
and  are  so  considered  in  law;  but  they  differ  from  the  ordinary  forms  of 
partnership  in  their  organization.  These  companies  were  formerly 
more  common  in  this  country  than  they  are  at  the  present  time.  Since 
the  enactment  of  general  laws  by  the  legislatures  of  most  or  all  of  our 
states,  under  which  corporations  may  be  quickly  and  easily  organized, 
they  have  almost  entirely  taken  tlie  place  of  joint-stock  companies. 
Formerly  it  was  necessary  in  the  organization  of  every  corporation  to 
procure  a  charter  from  the  legislature.  This  usually  involved  much 
delay,  and  not  infrequently  large  expense,  and  rather  than  await  the 
result  of  such  special  legislation,  the  persons  interested  in  the  proposed 
business  or  undertaking  would  risk  the  responsibilities  of  partners. 

How  Formed. — The  joint-stock  company  has  been  usually  adopted 
in  preference  to  the  ordinary  partnership  where  the  number  of  the  per- 
sons interested  is  so  large  as  to  make  it  very  inconvenient  to  conduct 
the  business  as  is  commonly  done  by  copartners.  It  often  has  as  com- 
plete an  organization  as  a  corporation.  The  stockholders  forming  the 
association  enter  into  articles  of  agreement,  which  regulate  and  define 
the  rights  of  the  members  among  themselves.  These  articles  provide 
for  the  manner  of  forming  the  company;  the  amount  of  the  capital 
stock;  the  number  of  shares  and  the  amount  of  each;  the  manner  of 
transferring  the  stock;  and  the  election  or  appointment  of  officers  and 
agents.  They  also  provide  for  the  management  of  the  business  of  the 
company,  and  include  all  other  provisions  considered  necessary  or  proper 
for  conducting  its  affairs. 

Liability  of  Stockholders. — Ordinarily  the  members  or  stockholders 
are  personally  liable  for  the  debts  of  the  company,  the  same  as  copart- 
ners for  the  indebtedness  of  the  firm.  That  is,  if  the  assets  of  the 
company  are  exhausted  and  there  are  debts  yet  remaining  unpaid,  each 
stockholder  is  liable  to  the  creditors  for  the  full  amount  of  such  debts. 
When  no  statutory  provisions  exist  regulating  the  liability  of  members,  it 

155 


156  JOIN-T-STOCK    COMPANIES. 

is  determined  upon  the  same  principles,  and  in  the  same  manner,  as  in 
the  case  of  ordinary  partners. 

In  some  states  the  formation  of  these  companies  and  the  liability  of 
their  members  is  regulated  by  statute,  and  they  are  given  certain  cor- 
porate privileges.  In  New  York  a  joint-stock  company  may  sue  and  be 
sued  in  the  name  of  its  President  or  Treasurer,  and  the  members  are 
not  individually  liable  until  a  judgment  has  been  recovered  against  the 
company,  and  an  execution  issued  thereunder  has  been  returned 
unsatisfied.  These  companies  are  not  dissolved  by  the  death  of  a  mem- 
ber, or  by  a  sale  or  transfer  of  his  stock,  as  is  the  case  in  an  ordinary 
partnership.  A  joint- stock  company  is  said  to  be  more  than  a  partner- 
ship and  less  than  a  corporation — it  is  in  fact  an  intermediate  stage  in 
the  development  of  the  former  into  the  latter. 

Business,  How  Conducted. — Usually  the  business  of  the  company 
is  transacted  by  trustees  or  directors  chosen  for  that  purpose  by  the 
stockholders.  On  a  dissolution  these  managers  usually  become,  under 
the  articles  of  agreement,  trustees  to  convert  the  assets  of  the  company 
into  money,  and  distribute  the  same  among  the  members.  While  the 
company  is  treated  in  law  as  a  partnership,  yet  the  shareholders  have 
different,  and  in  some  cases  greater,  rights  than  copartners. 

Voluntary  Clubs. — Many  voluntary  clubs  or  associations,  such  as 
lodges  of  Free  Masons  and  Odd  Fellows,  are  in  form  joint-stock  com- 
panies. Where  such  is  the  case  they  cannot  be  sued  in  that  capacity, 
but  the  members  may  be  proceeded  against  individually.  Many  clubs 
of  this  kind  are  now  regularly  incorporated,  the  tendency  being  in  that 
direction,  the  same  as  in  the  case  of  business  enterprises. 

QUESTIONS. 

What  are  joint  stock  companies  ?  How  are  they  considered  in  law  ? 
How  do  they  differ  from  ordinary  partnerships  ?  Why  were  they 
organized  ?  How  do  they  differ  from  partnerships  ?  What  is  the  lia- 
bility of  stockholders  ?  What  effect  has  the  death  of  a  stockholder  ? 
What  position  is  a  joint  stock  company  said  to  occupy  with  reference 
to  partnership  and  corporation  ?  How  is  the  business  of  these  com- 
panies conducted  ?  Have  shareholders  any  different  rights  from  part- 
ners ?    What  is  the  tendency  in  the  formation  of  companies  ?    Why  ? 


CHAPTER  XXXII. 


CORPORATIONS. 


KINDS,   ORGANIZATION,  AND   DISSOLUTION. 


Importance  and  Object.— Corporations  have  already  become  very 
numerous  in  this  country,  and  they  are  multiplying  rapidly  from  year 
to  year.  They  were  formerly  confined  largely  to  such  business  as 
banking,  insurance,  express  and  railway  transportation,  but  recently 
they  are  taking  the  place  of  individual  enterprises  in  mining,  manufact- 
uring, and  trade  ;  and  when  the  additional  fact  of  the  enormous  capi- 
tal they  represent  and  the  power  they  wield  is  considered,  the  import- 
ance of  the  subject  is  sufficiently  evident.  To  carry  on  the  immense 
business  enterprises  of  to-day  requires  a  larger  capital  than  can  usually 
be  furnished  by  single  individuals,  and  corporations  are  organized  to 
meet  tbis  need.     Corporations  may  be  either  sole  or  aggregate. 

Sole  Corporations. — These,  as  the  name  implies,  are  such  as  con- 
sist of  a  single  individual  who  possesses  corporate  powers.  In  England 
the  sovereign,  the  bishops  of  the  established  church,  and  some  other 
functionaries,  each  constitutes  a  sole  corporation.  Such  corporations 
are  organized  because  certain  offices  require  a  direct  succession  from 
one  holder  to  another  in  order  that  the  property  belonging  to  them  may 
remain  in  the  possession  of  the  officers,  without  going  through  the 
hands  of  executors  or  administrators. 

Aggregate. — A  corporation  aggregate  may  be  defined  as  a  collection 
of  individuals  united  in  one  body  under  such  a  grant  of  privileges  as 
secures  a  succession  of  members  without  changing  the  identity  of  the 
body,  and  constitutes  the  members  one  artificial  being,  capable  of 
transacting  some  kinds  of  business  like  a  natural  person.  A  corpora- 
tion is  said  to  be  an  artificial  person.  By  this  we  are  to  understand 
that  it  is  an  association  of  natural  persons,  who  are  considered  and 
treated  in  law  as  forming  a  new  and  distinct  body  or  individual. 
These  natural  persons  are  its  corporators,  or  stockholders,  but  the  cor- 
jx»ration  itself  is  a  different  individual — the  artificial  person.  All 
business  corporations  are  aggregate.     In  fact,  in  this  country,  we  have 

157 


158  CORPORATIONS. 

no  sole  corporations.     Corporations  aggregate  may  be  either  religious 
or  lay. 

Religious  Corporations,  sometimes  called  ecclesiastical,  are  those 
formed  for  the  purpose  of  managing  and  caring  for  the  property  of 
churches  and  congregations. 

L/ay  Corporations. — These  include  all  corporations  except  religious, 
and  they  are  divided  into,  (1)  eleemosynary,  and  (2)  civil. 

Eleemosynary  Corporations  are  those  formed  for  charitable  pur- 
poses, such  as  assisting  the  needy  by  way  of  alms,  education,  or  other- 
wise, and  caring  for  the  sick  and  disabled.  This  includes  hospitals 
and  other  charitable  institutions,  such  as  orphans'  homes,  etc.,  organ- 
ized for  the  purpose  of  dispensing  alms. 

Civil  Corporations. — These  include  all  those  organized  for  purposes 
other  than  charitable,  and  therefore  comprise  all,  or  nearly  all,  business 
corporations.     They  are  either  public  or  private. 

Public  Corporations  are  those  that  are  created  by  the  Government 
for  political  purposes ;  cities  and  villages  are  familiar  illustrations  of 
this  class  of  corporations.  They  are  given  the  power  to  legislate  within 
certain  limits.  They  may  pass  laws  or  ordinances,  as  they  are  usually 
called,  for  local  purposes,  such  as  improving  streets,  building  bridges 
and  sewers,  regulating  the  sale  of  food  products,  and  the  like.  Such 
ordinances  have  the  same  force  as  statutes  of  the  state,  but  the  power 
to  make  such  local  laws  is  subject  to  the  control  of  the  state  legislature. 
By  the  statutes  of  most,  if  not  all  our  states,  counties,  towns,  and 
school  districts  have  corporate  attributes.  They  may  take  and  hold 
property,  and  may  sue  and  are  liable  to  be  sued,  in  their  corporate 
capacity.  While  they  have  some  of  the  powers  and  privileges  of  cor- 
porations they  differ  from  them  greatly  in  other  respects.  They  are, 
therefore,  called  quasi  corporations,  which  means,  as  if,  or  in  a  manner, 
corporations. 

Private  Corporations  are  those  established  or  founded  by  private 
enterprise,  and  this  is  true  even  though  the  purposes  and  operation  of 
such  corporations  partake  of  a  public  nature.  For  example,  banks, 
insurance  companies  and  railroads  doing  business  of  a  public  nature, 
are  private  corporations. 

How  Created. — A  corporation  is  the  offspring  of  the  state,  and 
derives  its  being  and  its  powers  from  the  law.  Corporations  are  created 
in  one  of  two  ways,  viz.,  (1)  by  charter;  (2)  under  general  statute. 

Charter.— Where  a  corporation  is  formed  by  an  express  act  of  legis- 
lature it  is  said  to  be  formed  by  charter.  This  act  of  legislature  is  the 
charter,  and  it  provides  that  certain  persons,  whose  names  are  embodied 
in  it,  shall  constitute  a  corporation  under  some  specified  name  with 


KINDS,    OKGANIZATION,    AKD    DISSOLUTION.  139 

certain  specified  powers.  This  charter  when  once  accepted  and  acted 
upon  assumes  the  nature  of  a  contract  between  the  state  and  the  corpo- 
rators ;  it  cannot,  therefore,  be  impaired  or  altered  by  any  subsequent 
act  of  the  legislature,  unless  the  power  to  alter  or  amend  it  is  reserved 
in  the  charter.  Hence  such  a  corporation  becomes  independent  of  the 
legislature.  This  naturally  opened  the  way  to  abuses  on  the  part  of  cor- 
porations and  led,  in  most  cases,  to  the  introduction  of  a  clause  into  the 
charter  reserving  the  right  to  the  legislature  to  amend  or  repeal  it.  Some 
state  constitutions  forbid  the  legislature  from  passing  special  acts  con- 
ferring corporate  privileges,  and  provide  that  all  corporations  shall  be 
organized  under  general  statutes. 

General  Statute. — Recently  the  method  of  forming  corporations  by 
charter,  especially  those  for  business  or  manufacturing  purposes,  has 
given  place  almost  entirely  to  incorporation  under  the  statute.  And 
this  means  that  the  legislatures  of  most,  if  not  all  the  states  and  terri- 
tories have  now  enacted  general  laws  providing  for  the  formation  of 
such  corporations  which  may  be  organized  by  compliance  with  the 
terms  of  these  statutes.  There  is  a  great  similarity  among  these  laws 
so  far  as  the  main  provisions  are  concerned.  Although  they  differ 
somewhat  in  detail  they  render  the  formation  of  corporations  under 
them  a  comparatively  simple  matter,  free  from  the  delays  of  the  other 
method.  The  usual  method  is  for  the  individuals  who  desire  to  be 
incorporated  to  ask  the  particular  state  officer  for  a  charter.  In  this 
request  the  objects  of  the  corporation,  the  capital  stock,  the  place 
where  it  is  to  do  business,  and  a  few  other  things  are  stated.  The 
particular  officer  then  issues  the  charter  organizing  the  company. 

Agreements  to  Take  Stock. — Whether  a  person  who  signs  a 
subscription  list  agreeing  to  take  stock  in  a  corporation  about  to  be 
formed  is  bound  by  his  contract,  is  a  question  that  has  been  much  dis- 
cussed and  has  been  differently  decided  by  the  courts  of  the  different 
states.  The  general  result  of  these  opinions  seems  to  be  that  a  simple 
subscription  is  not  binding,  for  want  of  consideration.  However,  if  the 
subscriber  agrees  to  take  the  stock  if  a  certain  amount  is  raised,  or 
authorizes  those  engaged  in  getting  the  subscription  to  incl^r  trouble 
or  expense  on  the  faith  of  his  subscription,  it  will  be  binding. 

Issue  of  Stock. — The  money  or  property  subscribed  and  paid  in  or 
turned  over  to  the  corporation  constitutes  its  cai)ital  or  capital  stock. 
Each  subscriber's  interest  in  this  capital  stock  is  represented  by  the 
proportion  which  his  subscription  bears  to  the  whole.  This  capital 
stock  is  divided  into  shares  of  a  specified  value,  and  a  certificate  or  cer- 
tificates are  issued  to  each  stockholder  representing  the  number  of 
shares,  or  in  other  words  the  amount  of  stock  to  which  he  is  entitled. 


160  CORPORATIONS. 

For  example,  the  capital  stock  of  the  Eastman  Company  is  jQve  millions 
of  dollars,  divided  into  fifty  thousand  shares,  of  the  par  value  of  one 
hundred  dollars  each.  Now,  if  Rollin  Steward  had  subscribed  ten 
thousand  dollars  he  would  be  entitled  to  one  hundred  shares  of  stock. 
The  following  would  be  a  proper  form  of  certificate  for  the  company  to 
issue  him: 

CERTIFICATE   OF    STOCK. 


INCORPORATED  UXDER  THE  LAWS  OF  THE  STATE  OF  NEVT  YORK. 


No   10. 


j-  TKEE     E-A.Sa?:Ewfl:j^3Sr  -j    lOO  Shares.    !• 


DllY   PLATE   AND   FILM   COMPANY. 

Capital,  S5, 000,000.  Shares,  $100  each. 


This  is  to  certify.  That  Rollin  Steward  is  entitled  to  one  hundred  shares  of 
the  Capital  Slock  of  The  Eastman  Dry  Plate  and  Film 
Company,  of  Rochester,  N.  Y.,  trantferable  only  on  the  books 
of  the  Company,  in  accordance  with  the  By-Laws  thereof,  in  per- 
son or  by  attorney,  on  the  surrender  of  this  Certificate. 

Witness,  the  Seal  of  the  Company  and  the  signatures  of  its  Presi- 
dent and  Treasurer. 
Rochester,  N.  Y.,  September  10,  1901. 

Henry  A.  Strong,  President.  George  Eastman,  Treasurer. 


\    SEAL,    t 


Or  if  he  chose  he  might  have  the  amount  divided  and  issued  to  him 
in  several  certificates. 

The  stock  is  issued  as  soon  as  it  is  placed  upon  the  books  of  the  cor- 
poration in  the  name  of  the  subscriber.  Simply  delivering  the  certifi- 
cate, or  script  as  it  is  sometimes  called,  is  a  mere  matter  of  form — it  is 
not  required  to  perfect  the  subscriber's  title.  In  declaring  dividends, 
corporations  are  governed  by  their  books  in  determining  to  whom  they 
are  payable.  When  a  dividend  is  declared  payable  in  general  terms,  it  is 
payable  to  each  stockholder.  The  script  is  evidence  of  title — it  is  not 
the  title  itself — hence  the  identity  of  any  given  number  of  shares  is  not 
changed  by  the  surrender  of  the  certificates  and  the  issuing  of  new  ones 
in  another  name. 

Transfer  of  Stock. — The  shares  of  stock  are  personal  property,  the 
same  as  a  promissory  note  or  a  horse,  hence  the  owner  may  sell  and 
transfer  them  at  his  pleasure.  But  since  the  certificate  is  only  evidence 
of  the  owner's  title,  this  transfer  must  be  made  upon  the  books  of  the 
corporation.  In  order  to  do  this,  the  seller  writes  across  the  back  of 
the  certificate  or  script,  a  brief  bill  of  sale  and  power  of  attorney,  author- 
izing the  transfer  to  the  buyer.  Suppose  Mr.  Steward  sells  his  stock 
represented  by  the  certificate  shown  in  the  preceding  form  to  Nelson 


KINDS,    ORGANIZATION,    AND    DISSOLUTION.  161 

Stevens,  he  would,  before  delivering  it,  make  thereon  substantially  the 
following: 

ASSIGNMENT  OF  STOCK. 

For  value  received,  I  hereby  sell,  assign,  and  transfer  unto  Nelson 
Stevens,  one  hundred  shares  of  the  capital  stock  of  the  Eastman  Dry  Plate 
and  Film  Company,  represented  hy  the  ivithin  certificate,  and  do  hereby 
irrevocably  constitute  and  appoint  George  Eastman  my  attorney  to  transfer 
the  said  stock  on  the  books  of  the  within  named  company,  with  full  power 
of  substitution  in  the  premises. 

Baled  Oct.  5,  1901.  ROLLIN  STEWARD. 

In  presence  of 

Warren  Jones,  Rochester,  N.  Y. 

The  buyer  presents  the  certificate  thus  indorsed,  to  the  proper  officer 
of  the  corporation — usually  the  Secretary — who  thereupon  cancels  and 
preserves  it  for  future  reference,  and  issues  another  certificate,  or  cer- 
tificates, in  its  place,  to  the  new  owner  of  the  stock,  after  making  the 
proper  entries  on  his  book  showing  the  transfer. 

By  What  Law  Governed. — A  corporation  created  in  one  state  may 
make  contracts  in  another  unless  prohibited  by  laws  of  the  latter,  and 
it  may  sue  in  any  state  where  it  has  rights  or  interests  to  defend.  Its 
property  and  all  its  transactions  are  subject  to  the  law  of  the  state  in 
which  it  assumes  to  do  business.  A  corporation  is  supposed  to  reside 
where  it  carries  on  business.  If  it  has  several  places  of  business  within 
the  state  under  whose  laws  it  was  incorporated  then  it  has  a  residence  at 
each.  Corporations  are  allowed  to  transact  lawful  business  almost  every- 
where. There  are  in  most  states  statutes  providing  for  the  transaction 
of  business  within  their  territory  by  foreign  corporations. 

Dissolution. — There  are  several  ways  in  which  corporations  may  be 
dissolved.  The  following  are  the  ordinary  methods,  though  they  are 
not  all  applicable,  as  we  shall  see,  to  every  corporation.  They  are  (1) 
j>y  limitation,  (3)  by  act  of  the  legislature,  (3)  by  surrender  of  thei] 
riglits  to  the  state  or  government,  and  (4)  by  forfeiture  of  franchise. 

Limitation. — This,  of  course,  applies  only  to  corporations  that  are 
incorporated  for  a  specified  time,  as  are  most  of  those  more  recently 
organized  for  commercial  purposes.  The  time  of  the  duration  of  such 
a  corporation  is  limited  by  its  charter,  or  the  general  statute,  and  in 
either  case  when  that  time  has  elapsed  it  is  dissolved  by  limitation. 

Act  of  the  Legislature. — Public  corporations,  such  as  towns,  coun- 
ties, villages,  and  cities,  created  for  governmental  purposes,  may  be 
modified  or  dissolved  at  any  time  by  the  same  power  that  created  them, 

that  is  by  the  legislature.     But  such  dissolution  cannot  be  maae  to 
■«i 


163  CORPORATIONS. 

destroy  or  abridge  the  rights  of  third  parties  against  the  corporation, 
nor  their  interest  in  its  property.  The  charter  of  a  private  corpora- 
tion, however,  as  has  been  said,  is  a  contract  between  the  governing 
power  and  the  incorporators,  and  hence  unless  the  authority  has 
been  expressly  reserved  in  the  charter  of  a  corporation,  or  the  general 
law  under  which  it  was  incorporated,  the  legislature  is  powerless  to  pass 
an  act  dissolving  it. 

Surrender  of  Rights. — Any  private  corporation  may  be  dissolved 
by  surrendering  its  franchise,  that  is,  the  rights  and  privileges  possessed 
by  it,  to  the  state  or  government,  but  such  dissolution  will  not  be  com- 
plete until  the  state  or  government  has  formally  accepted  the  surrender. 

Forfeiture  of  Franchise. — Corporations  may  forfeit  all  their  rights 
and  privileges  by  a  wrong  use  of  them,  called  misuser,  or  by  a  failure 
to  use  them,  called  nonuser,  and  either  may  result  in  dissolution. 
There  is  always  a  question  in  each  particular  case  as  to  what  degree  of 
abuse  will  result  in  forfeiture,  and  this  as  well  as  the  failure  to  use  the 
franchise,  must  be  determined  by  a  court  of  law  before  the  corporation 
will  be  actually  dissolved. 

Effect  of  Dissolution. — The  general  practice  now  is,  in  case  of  the 
dissolution  of  a  corporation,  for  the  court  to  appoint  a  person  called  a 
receiver  to  settle  its  affairs.  It  is  his  duty  to  take  charge  of  all  the 
corporate  property,  to  dispose  oi  it,  and  devote  the  proceeds  after  paying 
the  expenses  of  receivership,  to  the  satisfaction  or  the  debts  ol  the  cor- 
poration, and  if  any  balance  remain,  to  divide  it  among  the  stock- 
holders in  proportion  to  their  stock. 

QUESTIONS. 

What  is  said  of  the  importance  of  corporations?  of  their  object? 
Define  sole  corporation  ;  corporations  aggregate.  Define  religious  cor- 
porations ;  lay  ;  eleemosynary  ;  civil ;  public  ;  private.  In  what  ways 
may  corporations  be  created?  What  is  said  of  each?  What  is  said  of 
agreements  to  take  stock?  What  is  the  capital  stock  oi  a  corporation? 
How  issued?  How  transferred?  By  what  law  are  corporations  governed? 
How  may  corporations  be  dissolved?  What  is  said  of  each  way?  What 
is  the  effect  of  dissolution? 


CHAPTER  XXXIIL 


CORPORATIONS. 


PO^VERS  AND  lia:^ilities. 


Extent. — At  common  law  every  corporation  has  certain  powers,  the 
most  important  of  which  are  as  follows:  (1)  to  make  contracts;  (3)  to 
have  succession;  (3)  to  sue  and  be  sued;  (4)  to  make  and  use  a  common 
soal;  (5)  to  purchase,  hold  and  convey  property;  (6)  to  appoint  its  officers 
and  agents;  (7)  to  make  by-laws. 

Power  and  Mode  of  Contracting. — As  we  have  seen,  the  rule  is 
that  individuals  have  the  largest  liberty  in  contracting,  and  may  enter 
into  all  contracts,  except  only  such  as  are  illegal.  In  the  case  of  cor- 
porations the  rule  is  different.  They  can  only  contract  within  the 
scope  of  their  corporate  business — within  the  powers  given  to  them  by 
their  charter,  or  by  the  law  under  which  they  are  organized.  For  exam- 
ple, a  banking  corporation  cannot  enter  into  a  contract  for  the  building 
of  railroads,  nor  can  a  corporation  formed  for  the  manufacture  of  mow- 
inff  machines  enter  into  a  contract  to  build  steamboats.' 

Succession. — This  is  implied  in  the  definition  of  a  corporation,  and 
is  the  first  essential  of  its  existence.  It  means  that  the  •corporation 
continues  until  the  end  of  the  term  for  which  it  was  organized.  When 
an  officer  dies,  or  is  removed,  a  successor  is  elected  or  appointed, 
and  when  a  stockholder  sells  his  stock,  or  dies,  his  interests  pass 
mto  the  hands  of  some  one  who  succeeds  him.  Thus  wliile  a  part- 
nership is  dissolved  by  the  death  or  bankruptcy  of  a  member  of  the 
firm,  or  a  sale  of  his  interest  in  the  business,  a  corporation  survives  all 
such  changes  within  its  body  by  means  of  this  capacity  of  succession. 
When  the  term  of  a  corporation's  existence  is  not  limited  by  its  charter, 
or  by  law,  it  has  perpetual  succession — it  is  said  to  be  immortal. 
If  the  state,  in  granting  a  charter,  reserves  the  right  to  alter  or  repeal 
it,  the  corporation  does  not  have  a  right  to  perpetual  succession, 
because  its  continued  existence  depends  upon  the  will  of  the  legislature. 
The  rule  is  the  same  where  the  right  to  alter  or  repeal  it  is  reserved  in 
the  law  under  which  it  is  organized. 

163 


164  CORPORATIONS. 

Suits. — The  right  to  sue  and  be  sued  is  essential  to  the  defence  of  the 
rights  of  a  corporation.  Without  such  a  capacity  it  could  not  maintain 
its  existence.  It  must  bring  its  actions  in  its  corporate  name,  and  it 
must  be  sued  under  the  same  name.  It  differs  from  a  partnership  in 
this  respect,  since  a  partnership  must  sue  and  be  sued  in  the  names  of 
its  individual  members. 

Corporate  Seal. — The  right  to  make,  alter  and  use  a  common  seal 
is  one  of  the  incidental  powers  of  a  corporation.  Under  the  common 
law  it  "was  supposed  that  a  corporation  aggregate  could  not  manifest  its 
intentions  through  natural  agencies,  as  personal  acts  or  oral  discourse, 
but  that  this  could  only  be  done  in  an  artificial  way  by  the  use  of  its 
seal.  The  use  of  a  seal,  as  we  have  seen,  is  very  ancient.  It  had  been 
in  use  before  the  formation  of  corporations,  and  was  simply  adopted  by 
them.  The  use  of  a  seal  by  corporations  is  only  necessary  now  in  the 
performance  of  such  acts  as  are  required  by  law  to  be  done  under  seal, 
such  as  the  conveyance  of  real  estate.  When  used,  a  corporate  seal  has 
the  same  legal  effect  as  an  individual  seal;  for  example,  if  it  be  affixed 
to  a  note,  the  instrument  becomes  a  bond. 

Property. — The  power  to  purchase  and  convey  property  is  limited 
only  by  the  terms  of  the  charter  or  statute.  Where  there  is  no  such 
limitation  a  corporation  has,  as  far  as  amount  is  concerned,  the  same 
right  to  take,  hold,  and  convey  real  and  personal  property  as  a  natural 
person.  In  many  cases  the  amount  of  property  which  a  corporation 
may  acquire,  hold  and  convey,  is  restricted  by  law  as  well  as  the  pur- 
poses to  which  it  may  be  applied.  The  capacity  of  a  religious  corporation 
or  a  railroad  company  to  take  real  estate  and  other  property  is  usually 
limited  to  the  purposes  of  its  organization.  If  the  value  of  property 
acquired  by  a  corporation  be  within  the  limits  fixed  by  its  charter,  or 
the  statute,  and  afterwards  increases  beyond  that  limit  this  will  not 
affect  the  title  of  the  corporation.  Where  a  corporation  exceeds  its 
powers  in.  making  a  purchase  of  property  which  it  actually  receives  and 
uses  or  sells,  it  cannot  interpose  its  want  of  power  as  a  defence  to  a  suit 
against  it  for  the  purchase  price,  or  to  defeat  the  title  of  its  grantees. 
But  where  the  corporation  exceeds  its  powers,  its  contract  is  void  so 
long  as  it  remains  executory. 

Restrictions. — The  general  rule  is  that  corporations  may  sell  and 
convey  their  property  as  freely  as  individuals,  and  in  the  same  manner. 
This,  however,  has  been  restricted  in  the  case  of  religious  corporations. 
They  must  procure  an  order  of  the  court  authorizing  the  sale  and  con- 
veyance of  real  estate,  before  they  can  make  a  valid  transfer  of  property. 
Some  states,  however,  have  abolished  this  restriction  by  statute.  When 
a  corporation  acquires  real  or  personal  property  by  purchase,  it  acquires 


POWERS   AND   LIABILITIES.  165 

an  absolute  title;  but  the  rule  is  that  where  it  acquires  real  estate  under 
the  statute  for  a  particular  purpose,  the  title  will  revert  to  the  original 
owner  as  soon  as  that  particular  use  of  the  ground  ceases.  Where  a 
railroad  takes  private  property  for  its  road-bed,  and  afterwards  ceases  to 
use  it  for  that  purpose,  the  original  owners  of  the  land  are  entitled  to 
it — it  reverts  to  them. 

Officers. — A  corporation  has  the  right  to  choose  its  managers  or 
directors,  and  appoint  and  pay  its  subordinate  officers  and  agents.  The 
charter  or  general  law  under  which  the  corporation  is  organized 
generally  prescribes  the  mode  in  which  the  directors  shall  be  chosen. 
In  that  case  the  election  must  be  held  at  the  time  and  place  prescribed, 
and  upon  the  notice  required.  When  the  charter  or  general  act  pro- 
vides for  an  election  in  the  manner  to  be  prescribed  in  the  by-laws, 
these  are  thus  made  the  law  of  election.  Generally  a  stockholder 
has  one  vote  for  each  share  of  stock  which  he  owns.  He  votes  upon 
the  stock  standing  in  his  name  upon  the  books  of  the  corporation, 
whether  he  holds  it  in  his  own  right  or  as  a  trustee;  but  no  one  has  a 
right  to  vote  upon  stock  irregularly  issued,  or  owned  by  the  corporation 
itself,  even  though  it  stands  in  the  name  of  an  individual  as  trustee. 
This  right  to  vote  may  generally  be  exercised  by  proxy;  that  is,  the 
stockholder  may  give  a  written  power  of  attorney,  or  as  it  is  generally 
called,  a  proxy  to  vote,  to  some  person  who  is  thereby  authorized,  upon 
filing  this  document  with  a  proper  officer,  to  vote  for  the  absent  stock- 
holder.    The  following  is  the  usual  form  for  such  proxy. 

§tnow  all  Pctt  by  ©hcise  f  rnsJintiS,  That  /,  George  M.  Sternberg,  do 
lierehy  constitute  and  appoint  llenrij  S.  Miller  my  attorney  and  agent  for 
and  in  my  name,  place  and  stead,  to  vote  as  my  proxy  at  any  election  of 
directors  of  the  Rochester  Land  and  Stock  Company,  Limited,  according 
to  the  number  of  votes  I  should  be  entitled  to  vote  if  perso7ially  present. 

Ditt  'Witnesi;3i  Whtxtoi,  I  have  hereunto  set  my  hand  and  seal  at  the 
city  of  Rochester,  N.  V.,  this  fourth  day  of  August,  one  thousand  nine 
hundred  and  one. 

Geoege  M.  Steknbeeg.     [Seal]. 
Signed  and  delivered  in  ) 
the  presence  of         j 

T.  D.  Snyder, 

Rochester,  N.  Y. 

The  right  to  vote  belongs  to  every  stockholder,  and  yet  it  does  not 
depend  exclusively  upon  such  ownership.  Churclies  and  other  religious 
societies  have  no  stockholders,  and  yet  the  corporators  have  the  right 
to  vote  in  an  election  of  officers. 


166  CORPORATIONS. 

Duties  of  Officers. — A  corporation  must  act  through  its  officers, 
and  hence  the  i^ower  of  a  stockholder  is  exhausted  in  electing  the  offi- 
cers. A  stockholder  has  not,  usually,  any  further  concern  in  the 
transaction  of  the  corporate  business.  The  directors  are  the  represent- 
atives of  the  corporation,  and  have  full  power  to  do  business  to  the 
extent  of  corporate  power,  subject,  of  course,  to  the  directions  of  stock- 
holders given  in  the  form  of  by-laws.  The  corporation  must  act  in  the 
manner  prescribed  by  its  charter,  or  by  the  general  law,  and  therefore, 
if  it  be  required,  for  example,  to  contract  in  some  particular  way,  its 
agreement  made  otherwise  is  illegal  and  void.  The  directors  of  a 
corporation  are  trustees  of  its  property,  and  its  stockholders  may  hold 
them  liable  for  any  bad  faith  in  the  use  of  its  funds. 

Amotion. — The  right  of  amotion,  or  removal  of  an  officer  from 
office,  was  formerly  considered  one  of  the  incidental  powers  of  a  corpora- 
tion ;  but  the  old  rule  and  the  old  conditions  are  not  now  of  much 
importance,  because  corporations  in  this  country  are,  for  the  most  part, 
so  organized  that  the  officers  are  chosen,  and  the  corporate  affairs 
managed  as  prescribed  by  statute.  Even  where  this  is  not  the  case, 
and  the  officers  hold  for  a  definite  term,  they  cannot  be  removed  in  a 
summary  way.  The  directors  of  a  corporation  are  usually  chosen  for 
the  term  of  one  year.  They  hold  for  that  term  and  may  vindicate  their 
rights  in  an  action.  Officers,  like  the  cashier  or  teller  of  a  bank, 
appointed  for  an  indefinite  term,  may  be  removed  at  any  time. 

Disfranchisement,  or  expulsion  of  a  member  from  the  corporation, 
is  sometimes  permitted.  It  is,  however,  a  severe  measure  which 
deprives  a  member  of  his  interest  in  the  corporation,  and  hence  the 
existence  of  the  right  will  not  be  readily  presumed.  It  can  only  be 
resorted  to  where  the  power  is  expressly  given  by  charter,  or  necessarily 
implied  from  the  nature  of  the  corporation.  Generally  the  right  only 
exists  in  the  case  of  churches,  lodges,  and  other  such  organizations, 
where  the  members  of  the  corporation  do  not  hold  stock. 

By-Laws. — The  power  to  make  by-laws  is  usually  expressly  given  by 
charter  or  general  statute,  but  where  it  is  not  so  given,  it  is  under- 
stood. These  by-laws  are  the  rules  or  laws  laid  down  by  the  corpora- 
tion for  its  own  government.  They  provide  in  general  the  methods  of 
transacting  its  business,  as  well  as  for  the  regulation  of  its  own  internal 
affairs.  The  power  to  make  by-laws  is  in  some  cases  given  to  the 
directors,  and  in  others  to  the  corporation.  In  the  latter  case,  they  are 
passed  upon  and  adopted  by  the  corporators  or  stockholders.  The  by- 
laws must  be  consistent  with  the  law  of  the  land,  otherwise  they  will  be 
void.  They  must  also  be  consistent  with  the  charter  of  the  corporation 
and  they  must  be  reasonable  and  capable  of  enforcement. 


POWERS   AND    LIABILITIES.  16? 

Liability  of  Stockholders.— Under  the  common  law,  the  members  of 
a  private  corporation  were  not  liable  for  corporate  debts  or  obligations. 
If  the  corporation  became  bankrupt,  they  would,  of  course,  lose  all  they 
had  invested  in  its  stock,  but  farther  than  that  they  incurred  no  lia- 
bility. This  rule  of  liability  remains  in  force  wherever  it  has  not  been 
modified  by  special  charter  or  statute  provisions.  In  many  of  the  states, 
however,  such  modifications  have  been  made,  in  some  cases  making  a 
stockholder  individually  liable  for  all  the  debts  of  the  corporation,  the 
same  as  a  partner  is  responsible  for  the  firm  debts.  Usually,  however,  a 
stockholder  is  liable  for  the  amount  he  has  invested,  that  is  his  stock 
and  an  amount  equivalent  to  his  stock.  For  example,  a  person  holding 
five  thousand  dollars'  worth  of  stock,  upon  the  insolvency  of  the  corpora- 
tion, not  only  loses  the  stock,  but  he  is  in  addition  to  that  personally 
liable  for  the  corporate  debts  to  the  amount  of  five  thousand  dollars. 

QUESTIONS. 

What  powers  have  corporations?  What  is  said  of  succession?  of 
their  right  to  sue  and  be  sued?  of  the  corporate  seal?  of  their  power 
to  purchase  and  convey  property?  What  restrictions  are  there  on  this 
power?  What  is  said  of  choosing  officers?  voting  by  proxy?  What 
are  the  duties  of  officers?  What  is  amotion?  disfranchisement?  when 
exercised?  What  is  said  of  the  power  to  make  by-laws?  What  restric- 
tions are  there  on  this  power?  What  is  said  of  the  liability  of  stock- 
holders for  the  corporate  debts? 


CHAPTEE  XXXIT. 


FIRE    INSURANCE. 


Definition. — In  this  form  of  contract  the  insurer,  for  a  certain  prem- 
ium, insures  the  applicant  against  loss  or  damage  to  certain  premises  by 
fire,  for  a  specified  time,  and  to  the  amount  named  in  the  policy.  The 
insurer  in  some  cases  reserves  the  right  to  repair  or  rebuild,  and  so  make 
good  the  loss  of  the  insured. 

Insurable  Interest. — Tiie  policy  holder  must  have  an  insurable 
interest  in  the  thing  insured,  in  order  to  make  the  contract  valid.  By 
this  is  meant  such  an  interest  that  he  will  suffer  a  pecuniary  loss  in  case 
of  fire.  It  does  not  follow,  however,  that  only  one  person  may  have  the 
same  property  insured,  because  the  law  permits  the  ownership  of  distinct 
interests  in  the  same  thing,  and  each  owner  may  protect  his  own  inter- 
est by  insurance.  Thus,  the  owner  of  a  building,  having  had  it  insured, 
subsequently  mortgages  the  building,  and  the  mortgagee  may  have  it 
insured  to  protect  his  interest;  after  that  the  owner  enters  into  a  land 
contract  by  which  he  agrees  to  sell  the  building  to  a  third  party  who, 
after  paying  him  part  of  the  purchase  price,  obtains  an  interest  in  the 
premises,  which  he  may  have  insured.  A  person  who  is  merely  entitled 
to  the  rent  or  occupancy  of  premises  may  have  them  insured.  The  total 
of  insurable  interests  cannot  amount  in  any  case  to  more  than  the  value 
of  the  premises. 

The  Policy. — This  is  the  contract  between  the  insurer  and  the  in- 
sured. The  business  of  insurance  is  done  by  large  companies,  each 
having  its  own  printed  policy,  and  therefore  it  is  not  thought  advisable 
to  insert  a  form  of  policy  here.  Each  policy  usually  contains  a  large 
number  of  conditions  and  restrictions  which  the  insured  assents  to  by 
accepting  it.  It  is  interpreted  and  enforced  like  any  other  agreement. 
In  this  contract  the  parties  must  agree  in  regard  to  the  following  essen- 
tial elements,  viz. :  (1)  the  premises  and  risk,  (2)  the  amount  insured, 
(3)  the  time  the  insurance  is  to  continue,  and  (4)  the  premium. 

The  Premises. — The  policy  must  contain  a  description  of  the  prem- 
ises insured.  This  usually  includes  a  statement  of  the  facts  relating  to 
the  material  of  the  building,  the  means  of  heating  and  lighting,  the 
material  of  which  the  roof  is  composed,  the  title  or  interest  of  the  in- 
sured, the  liens  existing  upon  it,  to  what  use  it  is  put,  its  distance  from 

168 


FIRE  IN-SUEADTCB.  169 

other  buildings,  and  of  what  material  such  adjacent  structures  are  com- 
posed; and  if  it  be  personal  property  that  is  to  be  insured,  then  its  nature 
and  value,  and  the  nature  and  character  of  tiie  building  in  which  it  is 
contained;  and  in  either  case  what,  if  any,  other  insurance  is  in  exist- 
ence covering  the  same  property. 

The  Risk  is  ordinarily  the  danger  of  loss  or  damage.  In  fire 
insurance  policies  the  risk  is  the  danger  of  loss  or  damage  by  fire,  but 
in  most  policies  there  is  added  a  clause  insuring  against  lightning,  and 
recently  in  some  of  the  western  states  it  has  become  quite  common  to 
insert  a  provision  protecting  the  insured  against  loss  or  damage  resulting 
from  tornados  and  other  storms.  The  protection  against  loss  or  damage 
by  fire  includes  not  only  the  loss  resulting  from  the  actual  work  of  the 
fire,  but  also  all  damage  caused  in  putting  out  or  controlling  the  fire. 
The  damages  caused  by  the  use  of  water  in  such  cases  are  often  greater 
than  those  resulting  from  the  actual  burning.  If  there  be  no  clause  in 
the  policy  insuring  against  lightning,  there  will  be  no  protection  for 
the  insured  against  damages  resulting  from  that  cause,  unless  the  prop- 
erty or  building  be  actually  set  on  fire  by  the  lightning. 

In  the  absence  of  fraud  the  law  only  regards  the  immediate  cause  of 
the  loss,  so  that  even  though  the  owner  were  guilty  of  gross  negligence 
in  permitting  the  fire,  this  would  not  relieve  the  insurer  from  liability 
for  the  loss. 

Insurance  companies  usually  introduce  into  their  policies  a  clause 
excepting  them  from  liability  for  damages  resulting  from  fire  caused  by 
"invasion,  foreign  enemy,  or  any  military  or  usurped  power  whatso- 
ever," and  sometimes  adding  also  ''or  by  riot  or  civil  commotion." 

Chang-e  of  Risk. — A  policy  of  insurance  being  issued  upon  the  basis 
of  a  certain  degree  of  danger,  for  which  the  insured  pays  a  premium 
designed  to  be  proportioned  to  the  risk,  it  follows  that  if  tbe  danger  be 
increased,  the  risk,  and  therefore  the  premium,  must  be  correspondingly 
greater.  If  then  the  insured  does  anything  whereby  the  hazard  of  the 
insurer  is  increased  without  his  consent,  it  amounts  to  a  change  of  the 
contract  which  will  render  it  void.  Any  alteration  in  the  building 
insured,  by  way  of  additions  or  repairs,  and  in  its  surroundings  by  the 
erection  of  other  structures,  changes  the  risk,  and  may,  if  it  be  thus 
increased,  make  the  policy  void.  So  does  a  change  in  the  occupancy, 
ownership,  or  use  of  the  building;  and  in  the  case  of  personal  property 
the  changing  of  its  location.  Tlie  insured  in  all  such  cases  should  there- 
fore have  the  consent  of  the  insurer  to  any  changes  or  alterations  of 
that  kind. 

Where  a  building  is  insured  to  be  used  in  carrying  on  a  particular 
business,  the  insured  is  at  liberty  to  use  the  ordinary  materials  in 


170 


FIRE   INSURANCE. 


its  prosecution.  The  insurer  is  supposed  to  be  acquainted  with  the 
business. 

Amount  Insured. — The  amount  for  which  an  insurance  policy  is 
issued  is  merely  a  maximum,  that  is  the  largest  amount  for  which  the 
company  can  be  made  liable.  It  is  a  full  protection  to  the  property  to 
the  amount  of  the  policy,  and  if  the  loss  be  the  same  or  less  in  amount, 
it  is  paid  in  full;  but  if  it  be  greater,  no  matter  how  much  greater,  the 
owner  will  receive  under  his  policy  no  more  than  the  amount  named 
in  it.  For  example,  if  a  building  worth  $3,000  and  insured  for  12,000 
is  damaged  by  fire,  to  the  extent  of  $2,000,  or  any  less  sum,  the  insured 
will  receive  the  amount  of  his  actual  loss,  but  if  the  building  be  totally 
destroyed,  he  can  recover  only  $2,000.  In  case  the  owner  suffers  a 
partial  loss,  and  the  company  pays  him  any  sum  less  than  the  full 
amount  for  which  it  had  insured  the  projDerty,  the  policy  continues  in 
force  only  as  to  the  balance  for  the  remainder  of  the  time.  Thus,  if  in 
the  preceding  example  the  building  were  damaged,  to  the  amount  of 
$500,  which  the  company  paid,  it  would  only  be  liable  under  that  policy 
for  subsequent  loss  to  the  extent  of  $1,500. 

Buildings  may  be  valued  or  appraised  before  insurance,  and  where 
this  is  done  without  fraud,  and  the  value  agreed  upon  by  the  parties, 
both  insurer  and  insured  will  be  bound  by  it.  If,  however,  the 
amount  stated  in  the  policy  is  plainly  more  than  the  value  of  the 
property,  it  will  be  evidence  of  fraud,  and  the  company  will  be  bound 
to  pay  only  the  actual  value. 

Insurance  in  Other  Companies. — Most  insurance  companies  will 
not  issue  a  policy  above  a  certain  fixed  sum,  which  differs  in  the  different 
companies,  and  they  will  issue  only  one  covering  the  same  property. 
Hence,  if  one  owns  a  valuable  building,  he  must  ordinarily  have  it  insured 
in  several  different  companies,  in  order  to  protect  his  interests.  In  such 
a  case,  if  the  building  be  damaged  by  fire  to  the  amo?int  of  all  the  insur- 
ance, then  each  company  must  pay  the  full  amount  of  its  policy.  On 
the  other  hand,  if  the  loss  be  less,  then  each  company  pays  that  propor- 
tion thereof,  which  the  amount  of  its  policy  bears  to  the  whole  amount 
of  the  insurance.  For  example,  a  building  is  insured  in  one  company 
for  $2,000,  in  another  for  $6,000,  and  in  a  third  for  $10,000.  A  fire 
damages  the  premises  to  the  extent  of  $9,000;  the  first  company  must 
pay  $1,000,  the  second  $3,000,  and  the  third  $5,000,  while,  if  the  loss 
had  been  $18,000,  each  must  have  paid  the  full  amount  of  its  policy. 
This  rule  is  not  affected  by  the  relative  dates  upon  which  the  policies 
were  issued.  If  one  had  been  in  force  one  year  at  the  time  of  the  fire 
and  another  one  day,  the  liability  of  the  companies  would  not  be  varied 
by  that  fact. 


FIRE   INSURAKCE.  171 

So  fill-  as  the  owner  is  concerued,  be  need  not  usually  resort  to  all  the 
companies  for  their  proportionate  share,  but  if  any  one  policy  is  suffi- 
cient to  cover  his  loss,  he  may  collect  the  full  amount  from  the  company 
which  issued  it.  In  that  case,  however,  the  company  paying  the  full 
amount  of  loss  may  collect  its  proportion  from  the  other  com- 
panies that  have  outstanding  policies  covering  the  property  destroyed. 
The  same  rule  of  contribution  applies,  as  in  the  case  of  co-sureties. 
Some  companies  have  a  condition  embodied  in  the  policies,  providing 
that  in  case  of  loss,  the  insured  shall  not  receive,  on  such  policy,  any 
greater  proportion  of  the  damage  sustained  than  the  amount  thus 
insured  shall  bear  to  the  whole  amount  of  insurance  on  the  same  prop- 
erty. In  that  case  the  insured  must  comply  with  the  condition,  and 
can  only  collect  from  the  company  its  proportion  of  the  loss. 

The  Time  the  Insurance  is  to  Continue. — This  is  always  par- 
ticularly specified  in  the  contract  even  to  the  exact  hour  of  the  day, 
which  is  usually  twelve  o'clock,  m.  Fire  insurance  policies  are  ordi- 
narily made  for  one,  two  or  three  years,  but  occasionally  they  are  made 
for  longer  or  shorter  periods.  It  is  the  custom  of  insurance  agents  to 
notify  their  patrons  of  the  expiration  of  policies  held  by  them.  When 
the  term  of  a  policy  expires  and  the  holder  desires  the  same  protection 
continued,  the  agent  either  issues  an  entirely  new  j)olicy  or  attaches  to 
the  old  one  a  renewal.  This  renewal  is  a  brief  contract  executed  by  the 
proper  officers  of  the  company  acknowledging  receipt  of  the  premium 
and  in  consideration  thereof,  in  terms  renewing  for  a  specified  time  the 
former  policy,  which  is  usually  referred  to  and  described  by  its  number. 
These  renewals  like  the  policies  are  printed  forms  j^rovided  in  all  cases 
by  the  company. 

Surrender  of  Policies. — Most,  if  not  all,  insurance  companies  now 
permit  their  policies  to  be  surrendered  at  any  time,  and  repay  to  the 
holders  a  certain  percentage  of  the  premiums.  This  repayment  of  pre- 
miums is  made  upon  a  fixed  scale,  and  is  somewhat  less  than  the  propor- 
tionable amount  for  the  unexpired  term  of  the  policy.  The  amount 
which  a  company  will  pay  for  an  unexpired  policy  is  called  its  surrender 
value. 

The  Premium. — The  amount  which  is  paid  for  insurance  is  the 
premium.  It  is  the  consideration  upon  which  the  company  undertakes 
to  protect  the  owner's  interest  in  the  thing  insured,  and  is  always  stated 
in  the  policy.  Its  amount  varies  with  the  risk,  and  is  supposed  in  each 
case  to  be  exactly  proportioned  to  the  probabilities  of  loss  from  fire  or 
other  cause  against  which  protection  is  given. 

Representations  and  Warranties. — In  applications  for  insurance, 
the  company  always  requires  statements  to  be  made  with  regard  to  many 


172  FIRE    INSURANCE. 

0 

things  which  will  affect  the  risk.  The  things  most  commonly  stated 
are  the  material  of  which  the  building  is  made,  its  surroundings,  such 
as  distance  from  other  buildings,  and  the  material  of  which  they  are 
composed,  the  manner  in  which  the  building  is  heated  and  lighted,  the 
purpose  for  which  it  is  used,  etc.  If  these  statements  are  not  made  a 
part  of  the  contract,  they  are  representations;  and  if  made  according  to 
the  best  of  the  applicant's  knowledge  and  belief,  and  without  fraud,  the 
jDolicy  will  be  binding  even  though  the  representations  be  not  all  abso- 
lutely correct.  Most  insurance  companies  now  make  the  statements 
regarding  the  property  contained  in  the  application  a  part  of  the  policy. 
They  then  become  warranties,  and  if  they  are  not  true,  whether  know- 
ingly false  or  not,  it  will  avoid  the  policy.  In  order  to  avoid  the  policy, 
however,  the  warranty  which  is  false  must  affect  the  risk.  Such  an  in- 
correctness as  does  not  in  any  way  change  the  risk  will  not  have  this 
effect. 

Conditious. — The  simple  contract  of  insurance  maybe  expressed  in  a 
few  words,  but  the  ordinary  insurance  policy  is  a  formidable  document; 
and  when  read,  as  it  ought  always  to  be,  and  occasionally  is,  it  appears 
to  be  composed  mostly  of  conditions.  Each  one  of  these  is  construed 
as  a  distinct  warranty,  and  must  be  literally  complied  with.  These 
conditions  very  often  include  the  uses  to  which  the  property  is  to  be 
put,  and  that  it  shall  not  be  used  for  certain  trades  or  for  storing  cer- 
tain goods,  whereby  the  risk  is  increased.  In  insuring  buildings  used 
as  stores  it  is  usually  stipulated  that  such  inflammable  and  explosive 
goods  as  kerosene,  gasoline,  benzine,  gunpowder,  etc.,  shall  not  be 
handled  by  artificial  light.  A  failure  to  comply  with  such  a  condition, 
whereby  damage  is  caused,  will  avoid  the  policy.  But  a  condition 
prohibiting  "storing  and  keeping  hazardous  articles"  is  not  broken  by 
a  mere  casual  placing  of  such  articles  in  the  building.  Nor  is  the 
keeping  and  using  of  such  articles  in  the  course  of  repairs  upon  the 
premises,  a  breach  of  the  condition. 

Assignment  of  Policy  or  Property. — Fire  policies  usually  contain 
a  provision  which  renders  them  void  in  case  the  policy  or  the  property 
is  assigned  or  transferred.  This  condition  applies  during  the  continu- 
ance of  the  risk.  After  the  loss  the  claim  is  assignable.  A  complete 
transfer  of  the  property  itself  without  the  policy  deprives  the  insured 
of  his  insurable  interest  which  destroys  the  contract,  because  the  in- 
surable interest  in  the  insured  is  not  only  essential  at  the  inception  of 
the  policy,  but  it  must  continue  through  its  whole  term. 

The  legal  effect  of  a  transfer  of  the  pro)ierty  in  avoiding  the  insur- 
ance may,  however,  be  prevented  by  the  consent  of  the  insurer.  It  is 
quite  customary  where  a  person  sells  premises  covered  by  an  insurance 


FIRE    INSURANCE.  178 

policy  that  would  not  expire  for  some  considerable  time,  for  him  to 
agree  with  the  purchaser  to  repay  to  him  a  proportionate  part  of  the 
premium  advanced,  and  continue  the  insurance.  Then,  instead  of 
having  his  policy  cancelled,  and  receiving  the  surrender  value  of  it,  as 
he  must  otherwise  do,  he  goes  to  the  agent  of  the  company  and  has  the 
policy  transferred.  This  is  always  done  by  the  company  without 
objection. 

Where  the  insured  does  not  transfer  the  premises  entirely,  but  only 
an  interest  in  them,  as  where  he  gives  a  mortgage  upon  the  property, 
and  it  is  agreed  that  the  buildings  shall  be  insured  for  the  benefit  of 
the  mortgagee,  the  insurer  may  have  his  policy  transferred  in  such  a 
manner  that  in  case  of  loss  the  mortgagee  will  be  first  paid  the  amount 
of  his  claim,  and  the  balance,  if  any,  the  company  will  pay  to  the  in- 
sured himself. 

Reinsurance. — The  insurer  has  an  interest  in  the  preservation  of 
the  property,  and  may,  therefore,  reinsure  it.  In  this  way  a  company 
may,  if  it  choose,  entirely  relieve  itself  of  the  risk,  or  may  share  it  with 
another  company.  The  party  originally  insured  has  no  interest  in  the 
new  policy.  In  case  of  loss  the  first  company  must  pay  the  insured  and 
collect  from  the  other  insurer. 

lioss. — The  damage  for  which  the  insurer  is  liable  under  a  fire  policy 
may  result,  as  we  have  seen,  not  only  from  the  actual  burning,  but  from 
the  use  of  water  in  extinguishing  the  flames.  It  may  also  be  caused  by 
the  excessive  heat  of  the  fire;  and  the  damage  may  even  be  the  result 
of  fire  in  adjoining  premises.  The  insurer  is  not  relieved  from  liability 
even  if  the  loss  occurs  through  the  negligence  of  the  insured.  Most 
fires  do,  in  fact,  result  from  negligence,  and  against  the  possibility  of 
this  the  insured  seeks  to  be  protected.  But  this  is  only  the-case  vv^here 
there  is  no  fraud.  If  the  insured  burns,  or  attempts  to  burn,  his  build- 
ings in  order  to  secure  the  insurance,  it  would  be  an  attempt  to  commit 
a  fraud  and  would  prevent  his  recovery.  And  in  case  of  fire,  he  must 
do  all  within  his  power  to  save  the  property,  or  he  will  not  be  protected 
by  his  policy. 

Adjustment  of  Loss. — "Where  the  policy  contains  no  valuation  of 
the  property  insured,  the  actual  value  of  the  property  at  the  time  of 
the  loss  determines  the  insurer's  liability.  In  such  cases  it  is  usual  to 
have  the  loss  appraised  by  disinterested  parties,  and  the  insurer  is  bound 
to  pay  the  loss  as  thus  estimated  unless  he  can  show  that  the  estimate 
is  not  correct. 

No  increase  or  decrease  of  its  value,  caused  by  some  unforeseen  cir- 
cumstance, can  be  taken  into  account;  neither  can  any  damage  or  in- 
convenience resulting  to  the  insured  or  his  business,  by  reason  of  being 


174  FIRE    INSURANCE. 

deprived  of  the  use  of  the  building  injured  or  destroyed.  If,  however, 
the  parties  have  valued  the  property  in  the  contract,  then,  as  we  have 
seen,  this  constitutes  the  basis  for  determining  the  loss.  The  insurance 
company  usually  sends  an  agent,  called  an  adjuster,  who,  after  the  loss 
has  been  determined,  pays  the  amount  due. 

QUESTIONS. 

Define  fire  insurance.  What  is  an  insurable  interest  in  property? 
What  is  the  contract  called?  What  should  it  contain?  What  is  stated 
regarding  the  premises?  the  risk?  What  effect  has  a  change  of  risk? 
What  is  said  regarding  the  amount  insured?  What  is  the  effect  of 
stating  the  amount  in  the  policy?  What  is  said  regarding  insurance 
in  more  than  one  company?  How  is  the  time  for  which  insurance  is 
to  continue  stated?  What  is  said  of  the  surrender  of  policy?  Define 
premium.  What  is  a  representation?  warranty?  How  do  they  differ? 
What  conditions  are  sometimes  placed  in  a  policy?  Give  their  effect. 
What  is  said  of  assignment  of  insured  property?  of  the  policy?  What 
is  said  of  reinsurance?  Under  what  circumstances  does  the  insured 
become-  liable?    How  is  the  loss  adjusted? 


CHAPTER  XXX"V. 


LIFE    INSURANCE 


Definitions. — The  contract  of  life  insurance  is  an  agreement  to  pay 
a  specified  sum  of  money  upon  the  death  of  a  certain  person,  or  when 
he  reaches  a  certain  age.  The  parties  to  the  contract  are  (1)  the  in- 
surer, and  (2)  the  person  to  whom  the  money  is  to  be  paid  on  the  policy, 
called  the  beneficiary.  Sometimes  a  person  takes  an  insurance  policy 
payable  to  himself,  in  which  case  if  it  be  payable  at  the  end  of  a  definite 
period,  and  he  be  then  living,  the  money  is  paid  to  him;  but  if  he  die 
before  the  expiration  of  the  time,  or  if  the  policy  be  payable  at  his  death, 
then  the  proceeds  are  paid  to  his  personal  representatives,  and  become 
a  part  of  his  estate.  In  most  cases,  however,  the  policy  is  made  payable 
to  some  person  other  than  the  one  insured,  and  in  that  case  the  cred- 
itors of  the  latter  have  no  claim  upon  the  proceeds,  nor  can  he  himself 
dispose  of  them  by  will,  or  otherwise. 

Insurable  Interest.  —  The  application  for  life  insurance  usually 
states  the  fact  that  the  person  applying  has  an  insurable  interest  in  the 
life  of  the  person  sought  to  be  insured.  A  person  cannot  have  the 
life  of  another  insured  in  whom  he  has  no  interest.  A  creditor 
may  have  the  life  of  his  debtor  insured  because  he  has  an  interest 
in  it.  A  person  has  an  insurable  interest  in  the  life  of  his  partner, 
or  one  who  is  engaged  in  business  with  him.  A  wife  has  such  an  in- 
terest in  the  life  of  her  husband,  and  a  sister  in  the  life  of  a  brother,  by 
whom  she  is  educated  and  supported.  A  father  has  an  insurable  in- 
terest in  the  life  of  his  minor  child;  and  a  woman  engaged  to  be  married, 
has  such  an  interest  in  the  life  of  her  prospective  husband.  In  general 
it  may  be  said  that  one  has  an  insurable  interest  in  the  life  of  a  person, 
if  by  the  death  of  that  person  he  will  naturally  suffer  a  pecuniary  loss 
or  disadvantage.  Unlike  fire  or  marine  insurance,  this  insurable  interest 
in  life  insurance  need  not  continue.  It  is  sufficient  if  it  exists  at  the 
inception  of  the  policy. 

Fraud  and  Concealment. — The  insurer,  in  consideration  of  the 
payment  of  the  specified  premium,  assumes  a  certain  risk.  Before  an 
insurance  company  will  insure  a  person's  life,  it  desires  to  know  that  he 
possesses  ordinarily  good  health,  and  in  order  to  determine  this  and  other 

175 


176  LIFE    lNSURA2SrCE. 

things  which  affect  the  risk,  it  is  customary  to  ask  the  applicant  for 
insui-ance  a  list  of  questions  bearing  upon  the  risk.  The  degree  of  risk 
the  company  assumes  depends  upon  many  circumstances,  such  as  the 
occupation  of  the  person  insured,  his  physical  condition,  inherited  ten- 
dency to  disease  and  the  like,  and  therefore,  in  order  to  estimate  this 
degree  of  risk,  the  insurer  is  entitled  to  have  the  questions  asked,  hon- 
estly answered.  Hence,  if  a  fraudulent  representation  is  made,  regarding 
the  matters  inquired  about  which  affects  the  insurer's  risk,  it  will  avoid 
the  policy.  If,  however,  all  the  questions  put  to  the  person  applying 
for  insurance  have  been  truly  and  fully  answered,  an  omission  to  state 
facts  not  called  for  is  not  fraudulent.  An  honest  answer  to  all  questions 
is  sufficient. 

Conditions. — Where  conditions  are  inserted  into  the  policy  or  con- 
tract, they  must  be  strictly  fulfilled.  If  it  be  provided  that  the  policy 
shall  become  void  in  case  an  annual  premium  is  not  paid  on  the  day 
specified,  a  failure  to  make  such  payment  annuls  the  contract;  and  even 
the  act  of  God  preventing  the  payment  will  not  serve  to  keep  the  policy 
in  force.  A  man's  occupation  and  place  of  residence  affect  his  chance 
of  life.  Hence,  where,  as  is  sometimes  the  case,  the  policy  contains  a 
condition  that  the  insured  shall  not  reside  in  certain  countries,  or  south 
of  a  specified  parallel  of  latitude,  or  that  he  shall  not  engage  in  certain 
kinds  of  business,  the  policy  is  annulled  by  a  failure  to  observe  such 
condition. 

The  condition  very  generally  inserted  in  life  insurance  policies  making 
them  void  in  case  the  insured  shall  die  by  his  own  hand,  has  caused,  a 
vast  amount  of  litigation.  It  has  generally  been  held  that,  in  order  to 
actually  render  the  policy  void  under  this  condition,  there  must  be  a 
criminal  act  of  suicide.  But  an  act  done  by  a  person  deprived  of  his 
reason  is  not  his  act,  and  therefore,  where  the  suicide  was  an  insane  act 
of  self-destruction,  committed  while  the  insured  was  in  such  a  disor- 
dered state  of  mind  as  not  to  understand  that  his  act  would  cause  his 
death,  or  where  the  act  was  committed  under  some  insane  impulse  that 
he  could  not  resist,  it  has  been  held  not  to  avoid  the  policy.  Some  of 
the  life  insurance  companies  have  now  made  this  condition  in  their 
policies  operative  only  for  a  certain  specified  time,  as  two  or  three  years, 
after  which  the  suicide  of  the  insured  cannot  be  interposed  as  a  defense 
to  an  action  against  the  company  to  compel  payment.  Some  companies 
insert  no  clause  avoiding  the  policy  in  case  of  suicide.  The  general 
tendency  of  insurance  companies  has  been  to  make  conditions  as  few 
and  as  reasonable  as  possible  in  order  to  increase  their  business,  so  that 
some  companies  now  insert  in  the  policy  a  provision  that  it  is  to  be 
without  conditions  after  the  expiration  of  two  or  three  years. 


LIFE    IN8URAN0B.  177 

Assignment. — All  life  insurance  policies  are  assignable  like  any  other 
chose  in  action,  unless  such  assignment  be  forbidden  by  the  statutes  of 
the  state.  The  insurance  companies  usually  establish  certain  rules  reg- 
ulating the  assignment  of  their  policies.  This  is  mainly  for  the  purpose 
of  keeping  them  informed  as  to  the  ownership  of  policies,  and  they  often 
provide  in  the  policy  itself  that  it  shall  be  void  if  it  is  assigned  without 
the  consent  of  the  company.  Persons  who  have  had  their  own  lives 
insured  for  the  benefit  of  themselves,  may  assign  the  policies  in  pay- 
ment of  claims  or  as  collateral  security  for  their  debts  and  obligations, 
and  they  are,  in  fact,  very  largely  used  for  the  latter  purpose  in  busi- 
ness transactions. 

Accident  Insurance  is  a  contract  of  indemnity  against  bodily  in- 
juries effected  through  external,  violent,  and  accidental  means  within 
the  intent  and  meaning  of  certain  conditions  annexed  to  such  policy. 
The  business  of  insuring  against  the  result  of  accidental  injuries  has 
grown  into  great  importance.  Accident  insurance  is  done  by  stock 
companies  which  issue  regular  policies  for  a  specified  time,  upon  pay- 
ment of  a  fixed  premium.  It  is  also  done  to  a  very  large  extent  by 
mutual  companies,  of  which  the  insured  becomes  a  member.  He  is 
then  obliged  to  pay  his  premium  in  the  form  of  assessments,  sometimes 
varying  in  amount,  at  stated  intervals,  usually  each  month;  and  his 
policy  is  avoided  and  his  protection  ceases  upon  a  failure  to  pay  such 
assessments  as  are  required  by  the  terms  of  his  agreement. 

The  Indemnity  usually  consists  in  the  payment  of  a  gross  sum  in 
case  of  death  and  of  a  weekly  payment  in  case  of  disability  from  injury. 
The  payment  in  case  of  death  is  restricted  by  a  provision  to  the  effect 
that  it  shall  only  be  made  in  case  the  insured  dies  within  a  specified 
time,  usually  ninety  days,  after  the  injury.  In  mutual  companies  the 
gross  sum  to  be  paid  in  case  of  death  depends  upon  the  number  of 
members  then  paying  assessments,  although  it  is  ordinarily  provided 
that  the  amount  shall  not  exceed  a  sum  named  in  the  certificate.  In 
other  companies  the  exact  sum  is  specified  in  the  policy.  In  the  case 
of  a  weekly  indemnity  the  amount  is  stated  in  the  certificate  or  policy, 
and  it  is  provided  that  in  no  case  shall  the  payment  continue  beyond  a 
specified  time,  usually  twenty-six  weeks.  Where  a  beneficiary  becomes 
entitled  to  payment  upon  the  death  of  the  insured,  all  sums  paid  as 
weekly  indemnity  on  account  of  disability  resulting  from  the  injuries, 
finally  causing  death,  will  be  first  deducted  and  only  the  balance  paid. 
In  accident  policies,  it  is  frequently  provided  that  in  case  of  a  loss  of 
two  limbs  or  both  eyes,  or  in  case  of  total  disability  in  any  other  way, 
the  full  amount  of  the  policy  will  be  paid. 

Injuries. — Insurance  against  injury  by  accident  includes  all  injuries 


178  LIFE    INSURANCE. 

not  excepted  by  the  terms  of  the  policy.  But  if  the  injury  is  attributable 
to  the  negligence  of  the  insured  it  is  not  accidental,  and  the  insurer  is 
not  bound;  as  where  a  passenger  negligently  puts  his  arm  out  of  the 
window  of  a  moving  car  and  his  hand  is  injured  by  a  post  standing  near 
the  track.  However,  the  negligence  of  the  insured  will  not  avoid  the 
policy  unless  there  is  an  express  provision  in  it  to  that  effect. 

Proof  of  Death  or  Injury. — Before  an  insurance  company  can  be 
compelled  to  pay  a  policy,  proof  must  be  furnished  of  the  death  or 
injury  of  the  person  insured.  In  case  of  death,  a  certificate  of  the 
attending  physician  or  an  undertaker  is  sufficient.  In  case  of  injury, 
a  certificate  of  a  physician  stating  the  time  during  which  the  person 
was  disabled  is  usually  required. 

QUESTIONS. 

Define  life  insurance.  "Who  are  the  parties?  What  constitutes  an 
insurable  interest  in  life?  Give  example.  What  does  an  application 
for  life  insurance  contain  ?  What  effect  has  fraud  and  concealment  ? 
What  conditions  are  sometimes  inserted  in  life  insurance  policies?  Give 
their  effect.  What  is  said  of  the  assignment  of  the  policy?  Define 
accident  insurance.  Of  what  does  the  indemnity  usually  consist?  What 
injuries  does  it  include?    What  is  said  of  death  or  injury? 


CHAPTEE  XXXTI. 


MARINE    INSURANCE. 


Definitions. — Marine  insurance,  like  fire  insurance,  is  a  contract 
by  which  the  insurer  agrees  to  indemnify  the  insured  against  certain 
perils  to  which  his  ship,  freight,  cargo  and  profits,  or  some  of  tliem, 
may  be  exposed  during  a  certain  voyage,  or  for  a  definite  time.  The 
parties  are  the  same  as  in  life  or  fire  insurance,  though  the  insurers  are 
more  generally  called  underwriters  than  in  the  other  classes. 

Insurable  Interest. — As  in  the  other  classes  of  insurance,  the  in- 
sured must  have  an  insurable  interest  in  the  property  covered  by  his 
policy,  or  it  will  not  be  valid;  and  further  than  that,  as  in  fire  insur- 
ance, this  interest  must  exist  at  the  time  of  the  loss.  Any  person  having 
an  actual  interest  in  the  property,  or  a  lien  upon  it,  may  have  it  insured. 
The  rule  is  that  any  person  may  be  said  to  have  such  an  interest  who 
may  suffer  from  the  injury  to  which  the  property  insured  is  exposed.  A 
creditor  who  has  loaned  money  on  bottomry  or  respondentia  bonds  has 
an  insurable  interest  in  the  ship  or  cargo.  Tiie  interest  which  an  in- 
surer acquires  by  the  risk  taken  gives  him  the  right  to  reinsure  the 
property.  This  is  often  done,  as  in  fire  insurance,  where  the  insurer 
wishes  to  relieve  himself  from  a  portion  of  the  responsibility,  or  he  may 
do  it  as  a  matter  of  profit,  which  results  in  case  he  reinsures  at  a  lower 
premium  than  he  received  from  the  owner. 

The  Property  Insured. — As  the  definition  implies,  the  ship,  freight, 
cargo  and  profits  may  be  insured.  Where  the  insurance  covers  the  body 
of  tlie  ship,  it  includes  also,  unless  there  be  some  agreement  to  the  con- 
trary, all  that  belongs  to  it,  and  is  necessary  and  proper,  in  the  course 
of  its  navigation.  The  freight  which  is  insurable  is  the  remuneration 
to  be  paid  to  the  ship  owner  for  the  hire  of  his  vessel.  This  is  held  to 
include  the  benefit  an  owner  would  derive  from  carrying  his  own  goods 
in  his  own  vessel.  The  property  insured  must  be  so  described  that  it 
can  be  identified,  and  where  this  is  done  a  mere  mistake  in  the  descrip- 
tion will  not  affect  the  validity  of  the  policy.  The  rule  is  that  where 
the  ship  is  specified,  it  becomes  a  part  of  the  contract,  and  the  cargo 
cannot  be  transferred  to  another  vessel  without  avoiding  the  policy, 
unless  it  is  done  from  necessity. 

179 


180  MARINE    INSURANCE. 

The  Risk. — In  marine  insurance,  the  risk  includes  all  extraordinary 
hazards  of  a  sea  voyage.  The  policy  usually  contains  a  considerable 
list  of  these  perils,  among  the  most  important  of  which  are  perils  of  the 
sea,  fire,  piracy,  theft,  capture,  arrest  and  detention,  barratry,  general 
average  and  salvage. 

The  expression,  perils  of  the  sea,  is  meant  to  include  the  risks  of  navi- 
gation, such  as  those  resulting  from  storms,  collisions,  rocks,  reefs,  etc. 
The  loss  by  fire  includes,  as  in  fire  insurance,  all  damage  resulting 
from  the  use  of  water  and  other  means  and  appliances  for  extinguishing 
or  staying  the  flames.  Piracy  and  theft  cover  all  losses  by  robbery  or 
thieving.  This  does  not  generally  include  theft  committed  by  persons 
who  were  lawfully  on  board  the  vessel.  Capture,  arrest  and  detention 
are  usually  combined  into  a  single  phrase,  and  refer  to  the  acts  done 
under  authority  of  some  government,  as  where  the  ship  is  captured  by 
a  man  of  war  belonging  to  a  hostile  nation.  Barratry  is  any  breach  of 
duty  committed  by  the  master  of  the  vessel  or  the  seamen,  without  the 
consent  of  the  owner,  by  reason  of  which  the  ship  or  cargo  is  injured. 
Sailing  out  of  port  without  paying  port  duties,  and  engaging  in  smug- 
gling, are  acts  of  barratry.  General  average  and  salvage  have  already 
been  explained. 

Duration  of  the  Risk. — This  depends  strictly  upon  the  agreement 
as  expressed  in  the  policy.  It  is  sometimes  a  specified  time,  as  a  month 
or  a  year,  or  it  may  be  for  a  particular  voyage.  Where  the  time  is 
specified,  the  policy,  as  in  fire  insurance,  states  the  exact  day  and  hour 
when  it  begins  and  ends;  and  it  is  sometimes  provided  by  a  special 
clause  that,  in  case  the  vessel  should  be  upon  the  ocean  when  the  date 
fixed  for  its  expiration  arrives,  the  insurance  shall  nevertheless  continue 
until  she  reaches  port. 

When  the  insurance  is  for  a  particular  voyage,  such  voyage  must  be 
accurately  determined  and  described.  This  requires  a  statement  of  the 
time  and  place  of  the  beginning  and  end  of  the  voyage,  and  all  inter- 
mediate ports  at  which  the  vessel  may  touch.  In  case  the  vessel  unnec- 
essarily deviates  from  a  course  thus  prescribed,  the  insurer  is  discharged 
from  liability  for  loss.  Even  touching  at  one  port  in  place  of  another, 
both  being  equally  in  the  way  of  the  vessel,  has  been  held  such  a  devia- 
tion as  to  render  the  policy  void.  Where,  however,  the  deviation  is 
rendered  necessary  by  stress  of  weather,  need  of  repairs,  or  to  avoid 
capture  or  detention,  it  will  not  discbarge  the  insurer.  A  deviation 
from  the  course  in  order  to  save  life  is  undei  2  moral  compulsion,  and 
will  not  avoid  the  policy.  A  policy  of  insurance  upon  the  cargo  covers 
aU  risks  until  the  goods  are  actually  landed. 

The  Amocmt  Insured.— This  may  be  agreed  upon  in  advanca  by 


MAEINE    INSUKANCE.  181 

the  parties  to  the  insurance,  who  settle  upon  a  valuation  which  is  in-, 
eluded  in  the  policy.  This  makes  what  is  known  as  a  valued  policy. 
The  effect  of  such  a  valuation  is  to  establish  the  basis  upon  which  to 
calculate  the  proportion  of  any  loss  for  which  the  insurer  will  be  liable. 
That  is,  the  insurer  only  pays  the  whole  loss  where  the  valuation  is  the 
same  as  the  amount  of  the  policy.  But,  if  the  goods  be  insured  for  a 
portion  of  their  valuation,  then  the  insurer  must  pay  only  that  propor- 
tion of  the  loss  represented  by  the  ratio  which  the  amount  of  the  policy 
bears  to  the  valuation.  For  example,  if  the  cargo  be  valued  at  $10,000 
and  insured  for  $5,000,  and  the  loss  amounted  to  18,000,  the  insurer 
would  be  liable  to  pay  $4,000;  and  if  the  loss  were  $2,000,  he  would 
pay  $1,000,  that  is,  in  any  event  he  must  pay  one  half  of  the  loss.  By 
insuring  for  half  or  any  other  fraction  of  its  value,  the  owner  is  held  to 
be  himself  the  insurer  of  the  remainder  of  the  cargo.  This  is  very  dif- 
ferent from  the  rule  in  case  of  valuation  in  fire  insurance  policies. 

An  open  policy  is  one  in  which  there  is  no  valuation  of  the  thing  in- 
sured. Under  such  a  policy  the  value  of  the  cargo  or  ship  in  case  of 
loss  must  be  determined  by  evidence,  and  it  must  be  the  value  at  the 
time  the  insurance  was  effected. 

Assignment  of  the  Property  Insured. — As  we  have  seen,  goods 
conveyed  by  a  vessel  may  change  ownership  one  or  more  times  and  be 
transferred  by  symbolic  delivery  before  they  are  actually  received.  In 
order  to  permit  this  without  the  consent  of  the  insurer,  a  certificate  is 
sometimes  issued  by  the  company,  which  may  be  transferred  from  one 
owner  to  another  with  the  title  to  the  goods,  without  affecting  the 
validity  of  the  policy,  and  in  case  of  loss  payment  will  be  made  to  the 
final  holder  of  this  certificate. 

Warranties. — The  stipulations  on  the  part  of  the  insured  are  termed 
warranties;  and  a  warranty  is  considered  either  afiirmative  or  promissory. 
It  is  affirmative  when  it  describes  the  ship  or  cargo,  and  promissory  when 
the  insured  undertakes  to  perform  some  act  or  thing,  as  that  the  ship 
shall  sail  by  a  given  day,  or  be  manned  in  a  particular  manner.  Such 
warranties  are  called  express,  and,  as  in  fire  insurance,  they  must  form 
a  part  of  the  policy.  Such  a  warranty  becomes  a  condition  precedent, 
and  must  be  performed,  or  there  is  no  valid  contract;  and  the  perform- 
ance must  be  strictly  literal,  no  matter  whether  it  be  material  or  not. 

There  are  also  certain  implied  warranties,  as  that  the  shi]?  shall  be  sea- 
worthy when  she  sails,  and  that  she  shall  be  properly  manned  and  navi- 
gated. These  implied  warranties  embrace  all  that  is  essential  to  the 
general  safety  of  the  vessel.  Any  breach  of  these  warranties  of  sea- 
worthiness at  the  commencement  of  the  voyage  will  discharge  the  insurer 
from  responsibility  for  loss.     It  is  only  the  extraordinary  perils,  as  we 


182 


MARIKE    INSURANCE. 


.have  seen,  which  are  covered  by  insurance.  The  ordinary  perils  must 
be  guarded  against  by  the  seaworthiness  of  the  ship,  and  its  proper 
navigation. 

Disclosure  and  Concealment. — The  insured  is  bound  to  disclose 
every  fact  within  his  knowledge  which  may  affect  the  determination  of 
the  insurer  to  issue  or  refuse  a  policy,  or  his  decision  in  fixing  the 
amount  of  the  premium.  A  failure  to  do  this  will  avoid  the  policy. 
And  the  same  result  will  follow  the  positive  misrepresentation  of  any 
fact  material  to  the  risk.  The  concealment  or  suppression  of  a  fact 
which  is  material  and  continues  until  the  risk  begins,  discharges  the 
insurer. 

Abandonment. — This  is  a  relinquishment  to  the  insurer  by  the 
insured  of  all  his  interest  in  the  portion  of  the  thing  insured,  which 
has  been  saved.  Of  course  there  is  no  such  thing  as  abandonment  in 
case  of  total  loss,  and  the  right  to  abandon  may  only  be  exercised  by 
the  insured  when  the  loss  has  exceeded  one  half  of  the  subject-matter 
of  the  insurance.  When  the  conditions  give  the  insured  the  right  of 
abandonment,  he  may  exercise  it  or  not  as  he  chooses;  but  the  insurer 
has  not  an  equal  liberty,  for  he  cannot  refuse  to  take  the  property,  and 
thus  be  relieved  from  the  payment  of  any  part  of  the  loss.  Abandon- 
ment cannot  be  revoked  by  the  insured  after  it  has  been  accepted  by 
the  insurer.  The  object  of  abandonment  is  to  enable  the  insured  to 
collect  the  whole  value  of  the  property  insured.  Insurance  is  some- 
times effected  by  agreement  between  the  parties  without  right  of  aban- 
donment, in  which  case  a  statement  to  that  effect  is  embodied  in  the 
policy. 

Adjustment. — The  adjustment  of  marine  insurance  losses  is  rather 
a  complicated  matter  involving  as  it  does  general  average,  salvage  and 
various  other  allowances.  It  is  generally  done  by  persons  who  make  it 
a  business  or  profession.  Ordinarily  the  loss  is  adjusted  at  the  first  port 
of  discharge  reached  after  it  occurs. 

Return  of  Premium. — The  insured  may  dissolve  the  contract  be- 
fore any  risk  has  been  incurred  by  electing  not  to  ship  the  goods,  or  not 
to  commence  the  voyage.  In  this  case  he  may  have  the  premium  re- 
turned to  him.  He  may  also  have  it  returned,  provided  there  has  been 
no  fraud  on  his  j)art,  where  the  contract  of  insurance  proves  to  have 
been  void  from  the  beginning,  as  from  the  failure  of  a  warranty. 

QUESTIONS. 

What  is  marine  insurance?  What  are  the  parties  called?  What  in- 
terest must  the  insured  have  in  the  thing  insured?  What  is  said  of 
reinsuring?    What  property  may  be  insured  ?    Where  the  insurance 


MARINE    INSURANCE.  183 

covers  the  body  of  the  ship,  what  does  it  include?  What  is  the  freight 
which  is  insurable?  How  must  the  property  insured  be  described? 
Upon  what  ground  may  the  cargo  be  shifted  from  the  vessel  specified 
in  the  policy?  What  does  the  risk  include  in  marine  insurance?  Name 
some  of  the  perils  mentioned  in  the  policy?  What  is  meant  by  perils 
of  the  sea?  What  does  the  loss  by  fire  include?  What  does  the  in- 
demnity against  piracy  and  theft  cover?  What  is  meant  by  capture, 
arrest  and  detention?  What  is  the  meaning  of  barratry?  Define  gen- 
eral average  and  salvage.  For  what  time  are  policies  made?  When  is 
an  accurate  description  of  the  voyage  necessary?  What  does  guch  a 
description  require?  What  is  the  effect  of  deviation  from  a  prescribed 
course?  What  is  a  valued  policy?  What  is  the  effect  of  such  a  valua- 
tion? How  does  the  rule  of  partial  insurance  in  a  marine  policv  differ 
from  that  in  a  fire  policy?  What  is  an  open  policy?  What  are  warran- 
ties and  how  are  they  divided?  When  is  a  warranty  affirmative  and 
when  promissory?  What  are  some  of  the  implied  warranties  in  marine 
insurance?  What  is  the  effect  of  a  breach  of  any  of  these  warranties? 
What  perils  are  covered  by  insurance?  Y/hat  is  abandonment?  When 
may  the  right  of  abandonment  be  exercised?  What  is  the  object  of 
abandonment?  By  whom  is  the  adjustment  of  marine  losses  generally 
effected?     Where  are  such  losses  ordinarily  adjusted? 


CHAPTER  XXXYII. 


PATENTS,  TRADE-MARKS   AND   COPY- 
RIGHTS. 


Patents. — The  Constitution  of  the  United  States  confers  on  Congress 
power  to  grant  to  inventors  the  exclusive  right  to  manufacture  and  sell 
their  inventions  for  a  limited  time.  Congress  has  carried  out  this  pro- 
vision of  the  Constitution  by  establishing  a  patent  office,  under  the 
direction  of  a  commissioner  of  patents,  and  has  made  rules  under  which 
patents  can  be  obtained.  To  obtain  a  patent  an  application  is  filed 
with  the  commissioner,  setting  forth  in  detail  a  description  of  the  in- 
vention and  what  it  is  to  do.  This  description  is  very  technical  and 
requires  a  patent  attorney  to  prepare  it.  Fifteen  dollars  must  be  de- 
posited with  the  application  to  pay  for  the  trouble  of  looking  through 
the  records  to  see  whether  the  article  is  patentable,  and  when  the  patent 
is  granted  twenty  dollars  more  must  be  paid.  This  first  fifteen  dollars 
is  not  refunded  though  the  patent  be  refused. 

Who  May  Obtain  a  Patent. — Any  one  who  has  invented  or  dis- 
covered any  new  and  useful  art,  machine,  manufacture  or  composition 
of  matter,  or  any  new  and  useful  improvement  thereof,  not  known  or 
used  by  others  in  this  country,  may  obtain  a  patent  therefor.  The 
patentee  must  be  the  first  as  well  as  an  original  inventor  or  discoverer, 
to  be  entitled  to  a  patent.  To  obtain  a  patent,  a  person  need  not  be  a 
citizen  of  this  country,  foreigners  being  entitled  to  the  protection  of 
the  patent  laws  equally  with  citizens. 

Assignment. — A  patent  is  property  which  may  be  bought  and  sold 
like  other  property.  The  rights  of  a  purchaser  depend  upon  the  terms 
of  the  agreement  under  which  the  patent  is  assigned.  The  right  to 
make  and  sell  the  article  within  a  certain  territory  may  be  sold,  and  in 
that  case  the  purchaser  has  all  the  rights  of  the  patentee  within  that 
territory,  but  has  no  right  outside  of  it. 

The  sale  may  also  be  of  the  full  right  to  the  patent,  in  which  case  the 
purchaser  succeeds  to  all  the  rights  of  the  patentee. 

Infringement. — The  patent  laws  give  the  patentee  the  exclusive 
right  to  make,  use,  and  vend  the  patented  article;  it  is  therefore  an 
infringement  to  make  or  use  or  sell  that  article,  and  the  patentee  has 

184 


PATENTS,    TRADE-MAEKS   AND    COPYRIGHTS.  186 

an  adequate  remedy  for  any  violation  of  his  rights.  In  case  of  infringe- 
ment in  any  of  these  ways  the  patentee  can  bring  an  action  for  damages 
against  the  party  so  infringing  in  a  United  States  court,  and  the  court 
is  authorized  to  award  damages  in  any  amount  not  exceeding  three  times 
the  actual  damage  sustained.  What  are  the  actual  damages  sustained 
must,  of  course,  be  determined  by  the  jury  in  view  of  all  the  facts. 

Trade-Marks. — A  trade-mark  is  any  name  or  device  used  by  a  seller 
in  connection  with  goods  sold  by  him,  in  order  to  secure  to  himself 
profits  arising  from  the  peculiar  character  of  the  goods  bearing  that 
mark.  The  mark  may  be  a  device  or  symbol  which  is  meaningless  in 
itself,  or  it  may  be  a  descriptive  word,  or  a  combination  of  the  two. 
The  mere  name  of  a  person  without  any  mark  to  distinguish  it  from 
the  same  name  possessed  by  others  cannot  be  protected  as  a  trade-mark. 

How  Acquired. — The  statute  which  regulates  the  granting  of  patents 
also  provides  for  the  protection  of  trade  marks.  In  order  to  secure 
protection  of  a  trade  mark  it  must  be  recorded  in  the  patent  office  in 
accordance  with  the  provisions  of  the  statute.  The  fee  for  recording  is 
twenty-five  dollars.  After  a  trade-mark  is  properly  recorded  its  owner 
is  protected  in  its  use  for  a  period  of  thirty  years,  and  if  application  is 
made  six  months  prior  to  its  expiration  and  the  usual  fee  paid  it  may 
be  renewed  for  another  thirty  years.  A  trade-mark,  when  properly 
registered,  becomes  property,  and  is  subject  to  transfer  like  any  other 
property.  It  may  be  sold  or  bequeathed  by  the  owner,  and  if  he  dies 
without  having  thus  disposed  of  it,  it  passes  by  inheritance  to  his  heirs. 

Infringement. — Any  imitation  of  a  trade  mark  sufficiently  close  to 
be  likely  to  deceive  a  person  into  the  belief  that  he  is  buying  the  trade- 
marked  article  when  he  is  not,  will  constitute  an  infringement,  and  will 
subject  the  infringer  to  the  payment  of  whatever  damages  may  be  occa- 
sioned by  such  infringement.  In  order  to  be  a  violation  of  a  trade-mark 
it  is  not  necessary  that  the  imitation  be  an  exact  copy;  if  sufiiciently 
like  it  to  deceive  a  merely  casual  observer  it  is  an  infringement. 

Copyrig-ht. — A  coj)yright  is  the  exclusive  right  which  the  law  secures 
to  a  person  to  publish  and  sell  the  product  of  his  brain;  like  a  writing, 
drawing,  or  an  engraving,  musical  composition,  sculpture,  or  anything 
else  of  like  nature.  The  law  allows  the  granting  of  copyrights  to  any 
resident  of  the  United  States,  and  according  to  a  recent  statute  also  to 
residents  of  foreign  countries,  if  the  country  in  which  they  reside  allows 
similar  privileges  to  residents  of  the  United  States.  Copyrights  are 
granted  for  a  period  of  twenty-eight  years,  and  may  be  renewed  for  a 
period  of  fourteen  years. 

How  Obtained. — The  librarian  of  Congress  is  made  by  law  the  reg- 
ister of  copyrights.     To  obtain  a  copyright  the  author  or  designer  must 


186 


PATENTS,    TRADE-MAKKS   AND   COPYKIGHTS. 


deliver  to  the  Librarian  of  Congress  a  printed  copy  of  the  title  page,  if  it 
be  a  printed  composition,  or  a  photograph,  if  it  be  a  painting,  drawing  or 
sculpture,  together  with  fifty  cents  to  pay  for  recording,  and  fifty  cents 
additional  if  he  desires  a  certified  copy  of  the  copyright  entry.  If  the 
copyrighted  article  be  a  book,  the  proprietor  must  also  mail  to  the 
Librarian  of  Congress  two  copies  of  the  same  in  the  best  binding  in 
■which  it  is  issued,  not  later  than  date  of  publication.  A  failure  to  do 
this  subjects  the  offender  to  a  penalty  of  twenty-five  dollars  and  renders 
the  copyright  void.  A  copyright,  being  property,  may  be  transferred 
by  sale,  by  inheritance  or  by  bequest,  like  any  other  property,  and 
the  person  into  whose  hands  it  comes  is  entitled  to  all  the  rights  of  the 
original  holder. 

Infring-ement. — Just  what  constitutes  an  infringement  of  a  copy- 
right is  a  question  that  has  been  very  much  discussed  and  which  has 
never  been  very  definitely  settled.  The  remedy  in  case  of  infringement 
is  generally  damages  for  the  injury  caused  and  an  injunction  ordering 
the  infringer  to  cease  violating  the  copyright  in  the  future. 


QUESTIONS. 

Define  patent.  How  is  it  obtained?  Who  may  obtain  a  patent?  For 
what  may  it  be  obtained?  What  is  said  of  the  assignment  of  patents? 
What  rights  has  an  assignee?  What  is  the  remedy  in  case  of  infringe- 
ment? Define  trade-mark.  What  is  its  purpose?  How  is  it  acquired? 
What  is  said  of  infringement?  What  is  a  copyright?  To  whom  is  it 
granted,  and  for  what?  How  is  it  obtained?  What  is  said  of  infringe- 
ment? 


CHAPTEE  XXXYIII. 


REAL   PROPERTY. 


Definitions  and  Explanations. — Eeal  property,  or  real  estate,  as 
it  is  often  called,  has  been  already  defined.  From  that  definition  it  is 
apparent  that  real  property  includes  all  minerals,  oil,  and  water  below 
the  surface,  as  well  as  everything  that  is  upon  and  affixed  to  it,  and  all 
these  pass  with  the  transfer  of  title  from  owner  to  owner.  So  strict  is 
this  rule,  which  includes  in  real  property  everything  of  a  permanent 
nature  attached  to  the  soil,  that  if  a  person  erects  a  building  on  the 
property  of  another,  or  affixes  to  the  soil,  or  builds  into  another  building 
any  other  structure,  it  will  usually  belong  to  the  owner  of  the  land,  and 
can  be  removed  only  with  his  consent. 

Appurtenances  is  a  word  frequently  used  in  connection  with  real 
property,  and  means  something  belonging  to  the  particular  premises 
described,  as  the  keys  of  a  house,  fences,  a  windmill,  or  gates. 

Rights  to  Real  Property. — In  England  the  title  to  all  real  prop- 
erty is  supposed  to  have  been  originally  in  the  king,  who  granted 
much  of  it  in  parcels  to  his  subjects.  But  these  grants  were  not  abso- 
lute; they  were  made  upon  condition  that  the  holders  should  always 
stand  ready  to  render  the  king  their  services  in  time  of  war,  both  per- 
sonally and  by  providing  men  and  supplies  for  his  armies.  These  pow- 
erful subjects  subdivided  their  estates,  and  allotted  the  land  to  large 
numbers  of  smaller  proprietors  who  then  became  their  vassals,  upon 
substantially  the  same  condition  of  service  as  that  under  which  they 
themselves  held.  This  interest  of  a  vassal  was  called  a  feud,  and  hence 
the  system  which  grew  out  of  the  practice  of  such  allotments  was  known 
as  the  feudal  system.  Feud  was  also  called  fief,  and  from  this  came  the 
word  fee.  In  England  when  a  feud,  fief  or  fee  was  granted  to  an  indi- 
vidual unconditionally,  it  was  termed  a  simple  fee,  or  a  fee  simple,  that 
is,  it  was  a  conveyance  without  restrictions;  and  the  words  are  used  in 
substantially  the  same  sense  at  the  present  time,  both  there  and  in  this 
country.  The  same  principle  is  applied  in  this  countr}',  and  it  is  held 
that  all  individual  titles  to  land  have  been  derived  since  the  Eevolntion 
from  the  government  of  a  state  or  of  the  United  States.     The  title  thus 

187 


188 


REAL    PROPERTY. 


derived  is  absolute,  except  that  in  all  cases  the  right  of  eminent  domain 
is  reserved  to  the  Government  or  the  State.  This  is  the  right  to  take 
individual  property  from  the  owners  for  public  uses  upon  paying  them, 
or  causing  them  to  be  paid,  a  just  compensation. 

Kinds  of  Rig-lits. — The  right  or  interest  which  a  person  has  in  real 
property,  is  called  an  estate,  as  an  estate  in  fee  simple,  an  estate  for  life, 
or  an  estate  in  reversion.  These  rights,  or  estates,  are  numerous,  and 
some  of  them  very  difficult  of  comprehension.  Only  a  few  of  the  more 
important  ones  will  be  here  considered. 

Estate  in  Fee  Simple. — This,  as  we  have  seen,  is  equivalent  to  full 
ownership  of  the  property.  The  owner,  therefore,  possesses  it  abso- 
lutely, subject  only  to  the  right  of  eminent  domain.  As  it  is  sometimes 
said,  he  owns  downward  to  the  center  of  the  earth  and  everything  upon 
the  surface.  No  one  may  come  upon  it  without  his  consent,  and  he  may 
use  all  necessary  force  in  removing  and  keeping  off  a  trespasser.  He  may 
use  the  proj)erty  as  he  chooses,  provided  he  does  not  thereby  cause 
injury  to  others  or  to  their  property.  He  may  sell  or  give  it  away,  and 
in  case  he  does  not  dispose  of  it  during  his  life,  or  by  will  at  his  death, 
then  iipon  his  decease  the  title  passes  at  once,  by  operation  of  law,  to 
his  heirs,  who  take  it  in  fee  simple  as  he  owned  it.  But  if  he  has  no 
heirs,  the  property  escheats,  that  is,  it  falls  back  to  the  original  owner, 
viz.,  the  State. 

Estate  for  Life. — The  owner  of  an  estate  in  fee  simple,  being  at 
liberty  to  do  what  he  chooses  with  it,  may,  as  it  is  sometimes  said,  carve 
out  of  it  other  and  lesser  estates.  For  example,  A  owning  an  estate  in 
fee  simple,  may  transfer  it  to  B  to  be  held  by  him  during  his  life,  or 
during  the  life  of  any  third  person,  in  which  case  B  has  what  is  termed 
an  estate  for  life.  The  owner  of  such  an  estate  has  a  right  to  the  full 
enjoyment  and  use  of  the  land,  and  all  the  profits  arising  from  it.  But 
he  has  no  right  to  destroy  or  waste  the  property  by  cutting  down  timber, 
unnecessarily  destroying  buildings  or  fences,  or  otherwise  doing  any- 
thing not  necessary  to  his  enjoyment  of  the  premises,  and  which  inflicts 
a  permanent  injury  upon  them.  His  interest  being  only  for  life,  the 
owner  of  the  remainder  of  the  estate  is  entitled  to  be  protected  from 
such  waste,  and  the  law  will  interfere  to  prevent  it. 

The  life  owner  cannot,  of  course,  sell  or  mortgage  the  property  itself , 
but  he  may  encumber  or  dispose  of  his  estate  in  it.  The  purchaser  of 
his  interest  would  take  the  same  right  to  the  use  and  occupancy  of  the 
premises  which  the  life  owner  himself  had,  and  be  subject  to  the  same 
restrictions  in  regard  to  injury  and  waste.  The  owner  of  the  life  estate 
must  pay  all  ordinary  tuxes,  and  a  just  proportion  of  such  necessary 
expenditures  as  are  for  the  permanent  benefit  of  the  property. 


EEAL   PROPERTY.  ISU 

Estate  iu  Reversion. — Where  the  owner  of  an  estate  in  fee  simple 
disposes  of  a  life  interest  in  it,  he  parts  with  only  a  portion  of  his  estate. 
He  still  has  remaining  an  interest  in  the  property,  and  after  the  expira- 
tion of  the  life  estate  the  premises  will  return,  or  revert  to  him,  or  to 
those  who  succeed  to  his  interest;  and  therefore  his  remaining  interest 
is  known  as  an  estate  in  reversion.  This  may  be  transferred  in  the 
same  manner  as  the  entire  estate.  In  tlie  last  illustration  B  has  an 
estate  for  life,  while  A  retains  an  estate  in  reversion,  which  he  may 
transfer  by  deed  or  will,  and  whoever  holds  it  will  take  the  property  in 
fee  simple  upon  the  termination  of  the  life  estate. 

Dower. — The  owner  of  real  property,  if  he  be  a  married  man,  cannot 
convey  it  and  give  a  perfect  title  unless  his  wife  joins  in  the  conveyance. 
This  is  because  a  wife  has  a  right  of  dower  in  all  the  real  property  owned 
by  her  husband.  This  gives  her  no  present  right  to  the  property  in 
any  way.  The  husband  may  sell  it,  and  the  grantee  take  possession  not- 
withstanding any  objection  the  wife  can  make.  Her  right  of  dower  is 
therefore  said  to  be  inchoate,  that  is,  incomplete.  But  if  she  survive 
her  husband,  the  moment  he  dies,  her  right  of  dower  is  complete  and 
she  may  claim  the  actual  possession  of  her  part  of  the  property  or  receive 
the  income  thereof.  And  this  claim  usually  extends  not  only  to  all  the 
real  estate  of  which  the  husband  dies  the  owner,  but  also  to  all  he  may 
have  sold  at  any  time  during  the  existence  of  the  marriage  relation  be- 
tween them,  in  the  conveyance  of  which  she  did  not  bar  her  dower,  by 
uniting  in  the  deed  or  executing  a  separate  relinquishment.  In  a  few 
states  the  widow  is  only  entitled  to  dower  in  the  land  which  her  husband 
owned  at  the  time  of  his  death,  and  hence  it  is  not  necessary  for  her 
to  join  in  the  husband's  conveyance  of  real  property.  In  some  states, 
a  married  woman  holding  real  estate  in  her  own  right  may  convey  the 
same  absolutely  without  the  knowledge  or  consent  of  her  husband. 

In  most  states  the  widow's  right  of  dower  consists  of  the  use,  durino- 
her  life,  of  a  certain  part  of  her  husband's  real  property.  Tliis  is  usually 
one-third,  but  in  some  states  a  half  or  other  fraction.  In  such  cases  it 
furnishes  an  illustration  of  an  estate  for  life.  In  a  few  states  the  stat- 
utes give  to  the  widow  for  her  dower,  not  a  life  estate,  but  the  fee  simple 
of  her  portion  of  the  property.  In  case  of  a  refusal  of  the  heirs  to  set 
apart  the  widow's  interest,  she  may  compel  such  division  by  an  action 
for  the  admeasurement  of  dower. 

Under  the  common  law  the  husband  had  a  somewhat  similar  ri^-ht  in 
the  real  property  owned  by  his  deceased  wife,  in  case  a  living  child  had 
been  born  to  them.  This  right  was  known  as  an  estate  by  the  curtesy. 
It  is  yet  recognized  by  the  laws  of  many  of  the  st^t^  in  that  form,  while 
it  has  been  modified  or  abolished  in  others. 


190 


REAL    PROPERTY. 


Other  Estates. — Property  is  sometimes  given  to  one  person  for  the 
benefit  of  another.  It  then  constitutes  a  trust  estate  in  the  person  to 
whom  it  is  thus  given,  who  is  called  a  trustee,  and  who  must  care  for 
and  manage  the  property,  or  pay  to  or  use  the  proceeds  for  the  benefit 
of  such  other  person,  Avho  is  sometimes  called  the  beneficiary.  There 
are  statutes  in  most  states  prohibiting  the  creation  of  trust  estates  for 
more  than  a  specified  time. 

Estates  are  distinguished  also  with  regard  to  the  number  of  owners. 
An  estate  in  severalty  is  one  that  is  owned  by  one  person.  Those  most 
frequently  met  with  which  are  held  by  several  owners,  are  estates  in 
joint  tenancy,  and  estates  in  common.  The  principal  distinction  be- 
tween these  is  in  the  fact  that  in  joint  tenancy  where  one  party  dies  the 
others  succeed  to  the  full  ownership  of  the  property,  whereas  in  tenancy 
in  common  they  do  not.  The  former  is  not  favored  by  the  law  and  will 
not  be  presumed.  In  several  states,  there  are  statutes  providing  that 
unless  it  be  explicitly  provided  in  the  conveyance  that  the  parties  shall 
take  as  joint  tenants,  any  two  or  more  owners  of  real  property  shall  hold 
it  as  tenants  in  common.  Any  one  of  several  persons  thus  owning  prop- 
erty may,  in  case  a  division  cannot  be  agreed  upon,  bring  an  action  for 
partition,  and  have  his  interest  secured  to  him  in  severalty. 

Highways. — The  owner  of  farm  lands  almost  universally  owns  to  the 
middle  of  all  public  highways  bounding  his  property.  The  public  has 
a  right  to  use  all  his  property  within  the  limits  of  the  roadway  for  the 
purposes  of  travel,  and  the  owner  may  not  in  any  way  interfere  with 
the  exercise  of  such  right.  He  may,  however,  cut  and  remove  the  grass 
growing  along  the  highway  ujjon  his  land,  or  use  it  in  any  other  way 
which  does  not  abridge  the  rights  of  the  public;  and  if  the  highways 
should  be  abandoned,  he  may  resume  full  control  of  his  property. 

Streams. — A  person  is  entitled  to  make  reasonable  use  of  a  stream  of 
water  flowing  through  his  land,  but  the  exception  already  noted  that  an 
owner  cannot  use  his  own  property  in  such  a  manner  as  to  injure  others 
or  their  property  applies  with  great  force  to  running  water.  The  owner 
may  make  all  ordinary  use  of  it.  He  may  even  change  the  course  of 
the  stream  upon  his  own  laud,  but  it  must  be  returned  to  its  usual  chan- 
nel when  it  enters  the  property  of  the  adjoining  owner.  And  he  must 
nob  contaminate  the  water  or  throw  into  it  any  waste  material,  as  saw 
dust,  from  a  mill,  to  be  carried  beyond  his  premises  and  deposited  to 
the  detriment  of  other  owners.  If  land  be  bounded  by  navigable  waters, 
the  owner's  title  usually  extends  to  high  water  mark.  But  if  his  bound- 
ary be  a  stream  not  navigable,  the  line  between  his  own  property  and 
that  of  adjoining  owners  is  the  middle  of  the  stream. 

Easements. — It  often  happens  that  the  owner  of  real  property  pos- 
sesses certain  privileges  in  neighboring  lands,  that  is,  rights  which  he 


REAL  PROPERTY.  191 

may  exercise  over  the  property  of  others.  These  privileges  are  known 
as  easements,  and  are  appurtenances  of  the  real  property  belonging  to 
such  owner,  and  pass  with  it  to  his  gi*antee.  The  right  of  way  which 
one  man  has  over  his  neighbor's  laud  to  enable  him  to  reach  a  highway, 
or  some  other  part  of  his  own  premises,  or  to  procure  water  from  a 
spring,  or  even  to  cut  and  carry  away  wood,  is  each  an  easement.  In 
cities  where  land  is  very  valuable,  adjoining  owners  often  unite  in 
erecting  a  wall  on  their  dividing  line,  one  half  of  it  being  on  the  prop- 
erty of  each.  This  is  called  a  party-wall,  and  supports  the  buildings 
on  both  sides  of  it.  Each  owns  his  own  half  and  has  an  easement  in 
the  other  half,  that  is,  a  right  to  have  it  remain  as  a  support  to  his 
building. 

Easements  are  created  by  special  gi*ant,  or  are  acquired  by  long  usage, 
that  is,  by  an  exercise  of  the  privileges  for  a  number  of  years,  the  length 
of  time  varying  in  diflPerent  states.  They  continue  until  they  are  actu- 
ally surrendered,  or  are  lost  by  a  failure  to  use  them,  which  amounts  to 
a  surrender. 

QUESTIONS. 

What  is  real  property?  What  does  the  term  include?  What  are 
appurtenances?  What  is  meant  by  a  fee  simple?  How  is  this  principal 
of  original  ownership  applied  in  this  country?  What  is  the  right  of 
eminent  domain?  What  is  an  estate?  What  are  some  of  the  rights  of 
the  owner  of  an  estate  in  fee  simj)le?  What  exception  is  there  to  his 
rights  to  use  his  property  as  he  chooses?  What  becomes  of  his  property 
in  case  of  his  death  without  having  disposed  of  it?  What  becomes  of 
it  in  case  he  has  no  heirs?  Illustrate  what  is  meant  by  a  life  estate? 
How  may  the  owner  of  a  life  estate  use  the  property?  How  is  he  re- 
stricted in  its  use?  What  is  an  estate  in  reversion?  How  may  this  be 
transferred?  Define  dower?  Why  is  the  wife's  dower  interest  called 
inchoate?  To  what  does  this  claim  of  dower  usually  extend?  How 
does  the  wife  bar  her  dower?  In  what  does  the  widow's  dower  right 
usually  consist?  What  may  her  estate  be  said  to  be  in  such  cases? 
What  is  an  estate  by  the  curtesy?  What  is  a  trust  estate?  What  are 
the  parties  called?  How  is  an  estate  designated  which  is  owned  by 
one  person?  Name  two  estates  in  which  there  are  two  or  more  owners. 
Distinguish  between  them.  How  far  does  the  title  of  the  owner  of 
farm  lands  include  adjoining  highways?  What  right  has  the  public  in 
such  highways?  What  use  may  the  owner  make  of  his  land  in  the 
highways?  What  use  may  a  person  make  of  a  stream  flowing  through 
his  land?  What  are  easements?  Give  illustration.  What  is  a  party- 
wall?  What  rights  have  the  adjoining  owners  in  it?  How  are  ease- 
ments created?    How  long  do  they  continue? 


CHAPTER  XXXIX. 


REAL   ESTATE   CONVEYANCES. 


DEEDS. 


Definitions  and  Explanations. — Real  estate  conveyances  include 
all  instruments  by  which  the  title  to  real  property  is  transferred  from 
one  person  to  another.  They  must  always  be  in  writing,  but  this  re- 
quirement is  fulfilled  where  the  instrument  is  printed.  As  a  matter  of 
fact,  nearly  all  such  conveyances  are  now  made  by  filling  in  printed 
forms,  and  are  therefore  partly  written  and  partly  printed.  Real  estate 
conveyances  are  of  two  kinds,  deeds  and  mortgages. 

Deeds. A  deed  is  an  executed  contract.     It  does  not  promise  to  do 

something;  it  does  it,  that  is,  it  conveys  the  property.  The  parties 
must  be  competent  to  contract.  The  one  who  conveys  the  property  is 
called  the  grantor,  and  the  one  to  whom  it  is  conveyed,  the  grantee. 
Deeds  are  now  much  simpler  documents  than  formerly,  although  in 
many  states  they  retain  at  the  present  time  considerable  of  the  old 
phraseology.  In  other  states,  short  forms  have  been  adopted  and  de- 
clared by  statute  sufficient  to  convey  complete  title.  The  forms  here 
given  are  those  in  use  in  the  state  of  New  York,  except  the  acknowl- 
edgment, and  they  would  probably  be  sufficient  in  any  state.  Deeds 
are  of  two  general  kinds,  warranty  and  quit  claim.  Of  warranty  deeds 
there  are  those  with  fall  covenant  and  the  simple  warranty. 

Warranty  Deed,  Full  Covenant. — The  warranty  deed  is  a  con- 
veyance in  which  the  grantor  warrants  the  title  to  the  property  and 
agrees  to  be  responsible  for  any  defect  in  his  title.  The  following  is  a 
form  of  warranty  deed  called  full  covenant: 

Full  Covenant  Wakrantt  Deed. 

^\n^  fttttcnture,  Made  this  tentJi  day  of  Jamiary,  in  the  year  of  our 
Lord  one  thousand  nine  hundred  and  one,  between  Andreio  D.  Whitney 
and  Emma,  his  wife,  hoth  of  Ithaca,  Tompkins  County,  New  York,  of 
the  first  part,  and  Oliver  D.  Reed,  of  Geneva,  Ontario  County,  New 
York,  of  the  second  part, 

192 


DEEDS.  193 

'^iint^^eth,  That  the  said  parties  of  the  first  part,  in  consideratioti  of 
the  sum  of  five  thousand  dollars  (15,000)  to  them  didy  paid,  have  sold, 
and  hy  these  presents  do  grant  and  convey  to  the  said  party  of  the  second 
part,  his  heirs  and  assigns,  all  that  tract  or  parcel  of  land  situate  in  the 
town  of  Lansing ,  Tompkins  County,  Neio  York,  being  apart  of  lot  number 
forty-nine  (49)  in  said  town,  and  bounded  and  described  as  follows,  to  wit: 
Beginning  at  the  southeast  corner  of  land  oioned  by  John  T.  Reynolds, 
and  7'unning  thence  north  one  hundred  and  tiventy-six  and  one-half  (126^) 
I'ods;  thence  east  to  the  east  line  of  said  lot  number  forty -nine  (49);  thence 
south  to  land  oioned  by  Chauncey  R.  Brow?i;  thence  ivest  to  the  northioest 
corner  of  land  oiuned  by  said  Broiun;  thence  south  to  the  center  of  the  high- 
way ;  and  thence  luest  to  the  place  of  beginning,  containing  one  hundred 
and  three  acres  of  land,  more  or  less,  with  the  apipurtenances,  and  all  the 
estate,  title  and  interest  therein  of  the  said  party  of  the  first  part,  f  And 
the  said  Andreiv  D.  Wliitney  does  hereby  covenant  and  agree  to  and  with 
the  said  party  of  the  second  part,  his  heirs  and  assigns,  ^tliat  at  the  time 
of  the  ensealing  and  delivei'y  of  these  presents,  he  is  the  lawful  oioner  and 
is  well  seized  of  the  premises  above  conveyed,  free  and  clear  from  all  incum- 
brances,* and  that  he  will  forever  warrant  and  defend  the  premises  thus 
conveyed  in  the  quiet  a7id  peaceable  possession  of  the  said  party  of  the  second 
part,  his  heirs  and  assigns,  against  any  person  whomsoever  lawfully  claim- 
ing the  sa7ne  or  any  part  thei'eof.\ 

^tt  UJitncjSijei  whfteof,  TJie  parties  of  the  first  part  have  hereunto  set  their 
hands  arid  seals  the  day  atid  year  first  above  written. 

ANDREW  D.    WHITNEY.     [seal.'\ 
EMMA    WHITNEY.  [seal.^ 

Sealed  and  delivered  in  presence  of 

J.  E.  Kline. 

Jlt»te  0f  Hfut  larU,    I  „ 
County  of  Tompkins,  f     * 

On  this  tenth  day  of  January,  in  the  year  one  thousand  riine  hun- 
dred and  one,  before  me,  the  subscriber,  personally  apjieared  Andreio 
D.  Whitney  and  Emma  Whitney,  his  loife,  to  me  known  to  be  the  same 
persons  described  in  and  who  executed  the  within  instrument,  and  sever- 
ally acknowledged  that  they  executed  the  same ;  and  the 
!■  — -"- — >  \      said  Emma   Wliitney  on  a  private  examination  by  me, 
SEAL.  >-      apart  from  her  said  husband,  acknowledged  that  she  exe- 
^  )      cuted  the  same  freely,  and  tvithout  any  fear  or  compulsion 

of  her  said  husband. 

B.  N.  SHERMAN, 

Notary  Public. 


194  REAL   ESTATE   CONVEYANCES. 

The  Distinctive  Feature  uf  the  foregoing  deed  is  that  part  of  it 
included  between  the  asterisks,  and  which  gives  it  the  name  of  full 
covenant.  These  covenants  are  not  essential  to  the  validity  of  the  con- 
veyance, but  being  included  in  it  they  become  very  important.  The 
covenant  that  "  he  is  the  lawful  owner  and  well  seized  of  the  premises" 
means  that  the  grantor  has  a  good  title  and  the  very  estate  he  professes 
to  convey.  It  is  known  as  the  covenant  of  seizin,  and  if  he  has  not 
such  title,  the  covenant  is  broken  the  moment  the  deed  is  delivered, 
and  the  grantee  has  an  immediate  right  of  action  against  him  for  dam- 
ages. The  same  is  true  of  the  other  covenant  against  incumbrances. 
An  unpaid  tax,  a  private  right  of  way,  or  an  undischarged  mortgage, 
would  constitute  a  breach  of  it  and  make  the  grantor  liable. 

Simple  Warranty  Deed. — Leave  out  of  the  last  form  that  part  in- 
eluded  between  the  asterisks,  that  is,  the  covenants  of  seizin  and  against 
incumbrances,  and  there  remains  the  ordinary  warranty  deed.  Unlike 
the  covenants  considered  in  the  last  section,  this  covenant  of  warranty 
is  only  broken  by  an  actual  eviction  of  the  grantee,  that  is,  by  his  being 
removed  from  the  premises  and  the  possession  taken  from  him  by  pro- 
cess of  law.  The  warranty  simply  says  that  the  grantor  will  warrant 
and  defend  the  property  in  the  possession  of  the  grantee,  and  it  conse- 
quently is  not  broken  until  the  grantee  is  no  longer  allowed  the  posses- 
sion.    Until  then,  he  has  no  right  of  action  against  the  grantor. 

If,  from  the  foregoing  form,  there  be  excluded  all  that  part  between 
the  daggers,  it  would  still  be  a  deed  and  would  convey  the  title  to  the 
premises,  but  containing  no  covenants  or  warranty,  the  grantee  would 
have  no  right  of  action  for  the  recovery  of  damages  from  the  grantor, 
in  case  the  title  should  prove  defective. 

Quit-Claim  Deed. — The  following  is  the  ordinary  form  of  quit- 
claim deed: 

Quit-Claim  Deed. 

®hiiS  Kmlcntuvf,  Made  this  seventeenth  day  of  January,  in  the  year  of 
our  Lord  one  thousand  nine  hundred  and  one,  letween  Charles  H.  Wil- 
liams (unmarried),  of  the  city  of  Buffalo,  County  of  Erie  and  State  of 
Neio  York,  of  the  first  part,  and  Andrew  Barron,  of  the  same  jjlace, 
of  the  second  part. 

W\ixkt^%t\\i,f  Tliat  the  said  party  of  the  first  part,  in  co7isideration  of 
the  sum  of  eight  hundred  dollars  (S800)  to  him  in  hand  paid  hy  the  said 
party  of  the  second  part,  the  receipt  whereof  is  hereby  confessed  and  ac- 
hioivledged,  has  *  bargained,  sold,  remised  and  quit-claimed,  and  ly  these 
presents  does  bargain,  sell,  remise  and  quit-claim  *unto  the  said  party  of 
the  second  part  and  to  his  heirs  and  assigns  forever,  all  that  tract  or  parcel 


DEEDS.  195 

of  land  situate  in  the  City  of  Rocheder,  County  of  Monroe  and  State  of 
New  York,  and  more  particularly  distinguished  as  lot  number  twenty 
(20),  as  laid  doion  on  a  map  of  Snyder  S  Sto?ie's  subdivision  of  apart  of 
the  Strong  Tract  on  fie  in  Monroe  County  ClerFs  office  in  liber  5  of  maps 
at  page  83.  Said  lot  number  twenty  (20)  is  situate  on  the  east  side  of 
Kenmore  street,  and  is  thirty-three  (33)  feet  in  vndth,  front  and  rear, 
and  one  hundred  and  fifty-nine  {\h^^  feet  deep.  Together  luith  all  and 
singular  the  hereditaments  and  appurtenances  thereto  belonging,  or  in  any 
wise  appertaining,  and  the  reversion  and  reversions,  remainder  and  re- 
mainders, rents,  issues  and  profits  thereof,  and  all  the  estate,  right,  title, 
interest,  claim  and  demand  whatsoever,  of  the  said  party  of  the  first  part, 
either  in  laiu  or  equity,  of,  in  and  to  the  above  bargained  premises,  with 
the  said  hereditaments  and  appurtenances,  to  have  and  to  hold  the  said 
premises  to  the  said  party  of  the  second  part,  his  heirs  and  assigns,  to  the 
sole  and  only  proper  benefit  and  behoof  of  the  said  party  of  the  second  part, 
his  heirs  and  assigns  forever. 

^«  WitUfiSiSi  whcvfof,  Tlie  p)arty  of  the  first  part  has  hereunto  set  his  hand 
and  seal  the  day  and  year  first  above  luritten. 

CHARLES  H.    WILLIAMS.     [seal.'\ 
Signed  and  delivered  i7i  presence  of 

George  F.  Stone. 

This  Deed  is  Distinguished  from  the  full  covenant  deed  by  having 
no  covenants,  and  by  containing  different  words  of  transfer.  These 
are,  in  the  quit- claim  deed,  the  words  included  between  the  asterisks, 
and  a  reference  to  the  corresponding  words  in  the  form  of  full  covenant 
deed  will  give  the  distinction.  The  quit-claim  deed  conveys  the  grantor's 
title,  if  he  have  any,  but  it  does  not  even  amount  to  a  representation 
that  he  has  such  title.  It  is  the  form  of  deed  used  by  heirs  or  other 
tenants  in  common  who  divide  their  real  property,  and  as  it  is  said, 
"quit-claim  to  each  other."  That  is,  if  A,  B  and  C  own  property 
which  they  wish  to  divide,  A  and  B  quit-claim  to  C  the  portion  set 
apart  to  him,  describing  it  in  the  deed;  A  and  C  in  like  manner  quit- 
claim to  B;  and  B  and  0  to  A. 

This  form  of  deed  is  also  used  where  the  grantor  is  in  doubt  as  to  the 
validity  of  his  title,  but  whatever  it  may  be,  wishes  to  convey  it.  It  is 
also  used  generally  in  the  relinquishment  of  apparent  interests  in  land, 
in  the  surrender  of  easements,  and  in  general  where  the  grantor  has  no 
actual  interest  in  making  the  conveyance,  but  does  it  for  the  benefit  of 
the  grantee  to  enable  him  to  perfect  or  transfer  his  title. 

Covenant  against  Grantor — It  often  happens  that,  although  the 
grantor  will  not  give  a  full  covenant  or  simple  warranty  deed,  yet  he  ia 
perfectly  willing  to  covenant  that  he  has  not  himself  done  or  permitted 


196  REAL   ESTATE    COXVEYAXCES. 

anything  to  be  done  injuriously  affecting  the  title,  and  in  that  case,  if 
the  grantee  desires  it,  there  is  inserted  in  the  deed  what  is  known  as 
the  covenant  against  grantor,  which  is  as  follows: 

Covenant  Against  Grantor. 

And  the  said  [grantor's  name], /or  liimself,  Ms  heirs,  executors  and 
administrators,  does  covenant,  promise  and  agree  to  and  tuith  the  said 
party  of  the  second  part,  his  heirs  and  assigns,  that  he  has  not  made, 
done,  committed,  executed,  or  suffered  any  act  or  acts,  thing  or  things 
2ohatsoever,  wherehy  or  iy  any  means  lohereof  the  above  mentioned  and 
described  loremises,  or  any  part  or  ixircel  thereof,  now  are,  or  at  any  time 
hereafter  shall  or  may  be,  impeached,  charged  or  encumbered  in  any  man- 
ner or  way  whatever. 

This  covenant,  when  used  in  a  quit-claim  deed,  is  inserted  just  before 
the  last  clause  beginning  "In  witness  whereof."  It  may  also  be  used 
in  a  warranty  deed,  thus  making  what  is  called  a  special  warranty  deed. 
It  would  then  take  the  place  of  all  the  covenants  included  between  the 
daggers,  in  the  warranty  deed  given  above,  which  would  otherwise  re- 
main the  same. 

Execution. — A  deed  is  a  contract  by  specialty,  and  the  consideration 
need  not,  therefore,  be  stated,  though  it  is  better  that  it  be  always  ex- 
pressed. The  names  of  both  parties  should  be  given  in  full  and  their 
respective  places  of  residence  stated.  Since  it  is  usually  necessary  that 
a  man's  wife  also  sign  the  conveyance,  if  the  grantor  is  unmarried  that 
fact  should  be  stated.  A  deed  is  usually  signed  only  by  the  grantor  or 
grantors.  But  by  accepting  it  the  grantee  becomes  a  party  to  it,  and  is 
bound  by  its  provisions,  as  for  example,  a  provision  that  he  shall  assume 
and  pay  a  mortgage  covering  the  premises.  The  grantor  need  not, 
however,  sign  the  deed  personally.  He  may  do  it  by  attorney,  that  is, 
he  may  a2Di)oint  some  jDcrson  by  power  of  attorney  who  may  sign  the  deed 
for  him.  Although  a  deed  is  said  to  be  a  sealed  instrument,  there  are 
only  a  few  spates  in  which  an  actual  seal  of  wax  or  paper  is  required.' 
In  most  states  a  mere  scroll  made  with  a  pen  is  suflBcient,^  and  in  others 
seals  are  not  necessary.' 

'In  the  following  states  a  seal  is  required  and  a  scroll  made  with  a  pen  is  not 
sufficient:    New  York,  New  Jersey,  Rhode  Island  and  Vermont. 

^  In  the  following  states  a  scroll  made  with  a  pen  is  sufficient  to  constitute  a  seal: 
Colorado,  Connecticut,  Delaware,  Florida,  Georgia,  Idaho,  Illinois,  Maryland, 
Michigan,  Minnesota,  Missouri,  Maine,  Nevada,  New  Mexico,  North  Carolina. 
Oregon,  Pennsylvania,  South  Carolina,  Utah,  Virginia,  Washington,  West  Vir- 
ginia, Wisconsin,  Wyoming  and  District  of  Columbia. 

*In  the  following  states  no  seal  at  all  is  required:  Arkansas,  California.  North 
Dakota,  South  Dakota,  Indiana,  Iowa,  Kansas,  Kentucky,  Louisiana,  Mississippi, 
Montana,  Ohio,  Nebraska,  Tennessee,  and  Texas. 


DEEDS.  197 

Ackiiowledgineut. — This  is  simply  a  statement  made  to  a  proper 
officer  by  the  parties  whose  names  are  signed  to  the  deed,  and  written 
by  the  officer  on  the  deed,  that  they  "vohintarily  signed  the  instrument. 
A  deed  is  binding  upon  the  person  who  signs  it  without  an  acknowledg- 
ment, but  it  cannot  be  recorded  unless  it  has  been  properly  acknowl- 
edged, except  that  in  some  states  the  affidavit  of  a  subscribing  witness 
to  the  genuineness  of  the  grantor's  signature  will  take  the  place  of  an 
acknowledgment.  In  some  states  when  a  husband  and  wife  execute  a 
deed,  the  law  requires  that  the  officer  shall  take  the  acknowledgment 
of  the  wife  separate  and  apart  from  her  husband.  The  instrument  may 
be  acknowledged  on  the  day  of  the  date  or  at  any  time  thereafter.  An 
acknowledgment  may  be  taken  by  a  notary  public,  justice  of  the  peace, 
or  by  any  officer  authorized  to  administer  oaths. 

Delivery. — But  the  deed  may  be  properly  drawn  and  executed,  and 
yet  it  has  no  force  whatever.  One  thing  is  wanting  to  make  it  effective. 
This  is  delivery,  and  by  it  is  meant  the  actual  handing  over  of  the  deed 
to  the  grantee  or  some  other  person  authorized  by  him  to  accept 
it.  The  deed  may  be  delivered  immediately  after  its  execution,  or  it 
may  be  held  for  months  or  years,  but  the  moment  the  delivery  is  made 
the  transfer  is  completed.  A  deed  is  sometimes  delivered  conditionally 
to  a  third  party,  who  is  to  hold  it  until  the  happening  of  some  event, 
when  he  is  to  hand  it  over  to  the  grantee.  In  that  case  it  is  said  to  be 
delivered  in  escrow. 

Recording. — After  a  deed  has  been  executed  and  delivered,  the  per- 
son receiving  it  ought  always  to  have  it  recorded  or  registered  immedi- 
ately. In  every  organized  county  there  is  provided  at  the  county  seat 
an  office  or  building  in  Avhich  public  records  are  preserved.  Among 
officers  there  is  an  officer  whose  duty  it  is  to  receive  and  record  in  books 
furnished  for  that  purpose,  all  conveyances  of  real  property  situated 
within  the  county,  and  instruments  affecting  the  title  thereof.  The 
officer  who  has  charge  of  this  duty  is  usually  called  a  Eegister  of  Deeds 
or  Recorder.  Sometimes  it  is  made  a  part  of  the  duty  of  the  county 
clerk.  Recording  a  deed  or  other  instrument  consists  in  writing  it  out 
in  full  in  the  record  books,  the  originals  being  returned  to  the  owner 
when  called  for.  The  law  prescribes  the  fees  for  registry.  An  instru- 
ment is  considered  in  law  as  registered  or  recorded  Avheu  it  is  handed 
to  the  recording  officer  for  that  purpose.  The  exact  time  even  to  the 
minute  of  its  receipt  is  therefore  always  entered  upon  the  instrument 
by  such  officer,  and  that  entry  determines  the  date  of  record. 

Effect  of  Recordiug-. — The  validity  of  an  instrument  is  not  in- 
creased by  record.  A  deed  conveys  the  title  just  as  well  before  as  after 
registry.     And  as  between  the  grantee  and  the  grantor  or  his  heirs,  or 


198  REAL   ESTATE   CONVEYANCES. 

third  parties  having  knowledge  of  the  conveyance,  there  is  no  necessity 
of  recording  the  instrument,  except  to  preserve  the  evidence  of  title  in 
case  of  the  loss  or  destruction  of  the  deed.  But  as  to  third  parties  hav- 
ing no  knowledge  of  the  transfer,  the  recording  of  the  instrument  is 
absolutely  necessary  in  order  to  protect  the  grantee's  title.  For  example, 
suppose  A  sells  and  conveys  his  farm  to  B,  who  neglects  to  record  his 
deed.  Afterwards  A  sells  the  same  property  to  0,  who  has  knowledge 
of  the  transfer  to  B;  0  cannot  hold  it,  notwithstanding  the  fact  that 
he  may  have  paid  A  full  value  for  the  property.  But  on  the  other 
hand,  if  C  had  purchased  the  property,  paying  value  for  it,  without 
knowledge  of  the  former  conveyance,  he  would  hold  the  property  as 
against  B,  and  be  protected  in  his  possession  and  ownership.  The  laws 
providing  for  the  registering  or  recording  of  such  instruments  are  known 
as  registry  laws,  and  are  designed  to  give  public  notice  of  the  condition 
of  the  titles  to  real  property. 

Land  Contract. — Real  property  is  often  sold  under  a  land  contract, 
which  must  always  be  in  writing.  This  method  is  adopted  when  the 
purchaser  can  only  make  a  small  payment  at  the  time,  when  the  owner 
requires  time  to  perfect  his  title,  or  when  there  is  some  other  reason  for 
delay  in  delivering  the  deed.  The  contract  is  therefore  an  agreement 
upon  sufficient  consideration,  on  the  part  of  the  owner,  to  sell  or  on  the 
part  of  the  purchaser  to  buy  the  particular  premises,  which  are  to  be 
conveyed  at  some  specified  future  date,  or  when  the  purchase  price  or 
some  jjarticular  part  of  it  shall  have  been  paid.  In  the  last  case  it  also 
contains  an  agreement  on  the  part  of  the  purchaser  to  execute  and 
deliver  to  the  seller  at  the  time  of  completing  the  conveyance,  a  bond 
and  mortgage,  or  a  note  and  mortgage,  to  secure  the  payment  of  the 
balance  of  such  purchase  Drice. 

QUESTIONS. 

What  are  real  estate  conveyances?  What  kinds  are  there?  Define 
deed.  What  are  the  parties  called?  What  kinds  of  deeds  are  there? 
Define  warranty  deed;  full  covenant  warranty;  simple  warranty.  De- 
fine quit-claim  deed.  How  is  it  used?  What  is  meant  by  covenant 
against  grantor?  How  is  a  deed  executed?  What  is  acknowledgment? 
What  is  said  of  delivery?  What  is  recording?  object?  effect?  What  is 
said  of  its  necessity?     What  is  a  land  contract?     Give  its  use. 


CHAPTEE   XL. 


REAL   ESTATE    CONVEYANCES. 


MORTGAGES. 


Mortgages. — A  mortgage  is  the  grant  or  conveyance  of  an  estate  or 
property  to  a  creditor  for  the  security  of  a  debt,  upon  payment  of  which 
it  is  to  become  void.  It  has  the  same  effect  as  a  pledge  of  the  property 
for  the  payment  of  the  debt,  and  it  is  called  a  mortgage,  whether  the 
property  conveyed  be  personal  or  real.  The  person  who  gives  the  mort- 
gage— the  debtor — is  called  the  mortgageor,  and  the  one  to  whom  it  is 
given — the  creditor— is  known  as  the  mortgagee. 

A  mortgage  of  real  estate  is  substantially  the  same  in  form  as  a  deed, 
with  the  addition  of  a  statement  of  the  amount  secured,  and  the  time 
and  manner  of  its  payment;  also,  an  authority  to  sell  in  case  of  default 
in  such  payment;  and  a  clause  making  the  instrument  void  in  case  pay- 
ment shall  be  made  as  specified.  This  last  is  called  the  defeasance 
clause.  The  following  is  an  ordinary  form  of  real  estate  mortgage  and 
is  supposed  to  be  executed  by  the  grantee  to  the  grantor,  to  secure  the 
payment  of  a  part  of  the  purchase  price  of  the  premises.  The  mort- 
gageor's  wife  need  not  join  in  a  purchase  money  mortgage,  but  must  in 
all  others  the  same  as  in  a  deed  and  for  the  same  reason. 

MOKTGAGE. 

S^hiiSi  ^ndftttute,  made  this  tenth  day  of  January,  in  the  yea)'  of  our 
Lord  one  thousand  nine  hundred  and  one,  between  Oliver  D.  Reed, 
of  Geneva,  Ontario  County,  Xeio  York,  of  the  first  part,  and  Andrew  D. 
Whitney,  of  Ithaca,  Toinphins  County,  Neiu  York,  of  the  second  part, 
W\X\\t^^t\\\,  that  the  said  party  of  the  first  part,  in  consideration  of  the 
sum  of  three  thousand  dollars,  being  a  part  of  the  purchase  price  of  the 
premises  hereinafter  described,  has  sold,  and  by  these  presents  does  grant 
and  convey  to  the  said  party  of  the  second  part,  his  heirs  and  assigns,  all 
that  tract  or  parcel  of  land  situate  in  the  Town  of  Lansing,  Tompkins 
County,  New  York,  beioig  a  part  of  lot  number  forty-nine  (49)  in  said 

199 


200  REAL   ESTATE    CONVEYANCES. 

toton,  and  bounded  and  described  as  folloivs,  to  wit :  Beginning  at  the 
Southeast  corner  of  land  oiuned  by  John  T.  Reynolds,  and  running  thence 
North  one  hundred  and  ticenty-six  and  one-half  rods  (12G|)  ;  thence  East 
to  the  East  line  of  said  lot  number  forty-nine  (49) ;  thence  South  to  land 
owned  by  Chauncy  R.  Brown;  thence  West  to  the  Northwest  corner  of 
land  onmed  by  said  Brown;  thence  south  to  the  center  of  the  highway; 
and  thence  West  to  the  ijlace  of  beginning,  containing  one  hundred  and 
three  acres  of  land,  more  or  less. 

^\\\$  ^rant  is  intended  as  a  security  for  the  2Jayment  of  the  sum  of  three 
thousand  dollars,  to  be  paid  iii  three  equal  annual  payments  of  one  thous- 
and dollars  each,  with  annual  interest  at  the  rate  of  five  per  cent,  on  all 
sums  at  any  time  remaining  unpaid,  according  to  the  conditions  of  a  Ijand 
this  day  executed  and  delivered  by  the  said  Oliver  D.  Reed  to  the  said 
party  of  the  second  j)art.  And  in  case  default  shcdl  be  made  in  the  pay- 
ment  of  the  principal  sum  hereby  intended  to  be  secured,  or  in  the  jMijment 
of  the  interest  thereof,  or  any  part  of  such  principal  or  interest,  as  above 
provided,  [(in  case  clauses  in  Sec.  12  are  used  add)  or  of  the  taxes,  as- 
sessments or  insurance  hereinafter  7nentio)ied],  it  shall  be  laioful  for  the 
party  of  the  second  part,  his  executors,  administrators,  or  assigns,  at  any 
time  thereafter,  to  sell  the  premises  hereby  granted,  or  any  part  thereof,  in 
the  manner  pr-escribed  by  law,  and  oiit  of  cdl  moneys  arisiyig  from  stick 
sale,  to  retain  the  amount  then  due  for  principal,  interest  {taxes,  assess- 
ments or  insurance],  together  with  the  costs  and  charges  of  inaking  such 
sale,  and  the  overjjlus,  if  any  there  be,  shcdl  be  paid  by  the  party  mahing 
such  sale,  on  demand,  to  the  said  Oliver  D.  Reed,  his  heirs  and  assigns. 
************ 

And  this  conveyance  shall  be  void  if  fidl  p)ayment  of  the  aforesaid 
moneys,  both  principal  and  interest,  be  made  as  hereinbefore  specified,  and 
if  the  aforesaid  covenants  and  each  of  them  be  loell  and  truly  kept  and 
performed  as  hereinbefore  specified  and ptrovided. 

|fu  xvitncssi  U'hcvcof,  the  party  of  the  first  p)art  has  hereunto  set  his  hand 
and  seed  the  day  and  year  first  above  ivritten. 

OLIVER  D.  REED.     \seal,'\ 

Ontakio  County,  [     " 

On  this  tenth  day  of  January,  in  the  year  one  thousand  tiine  hun- 
dred and  one,  before  me,  the  subscriber,  personally  appeared  Oliver  D. 
Reed,  to  me  known  to  be  the  same  person  described  in  and 
r.T..T    V     ivho  executed  the  ivithin  instrument,  and  acknowledged 

SEAIj.    c 

that  he  executed  the  same. 

B.  N.  SHE R 31  AN, 

Notary  Public. 


MORTGAGES.  201 

Additional  Clauses. — There  are  three  other  clauses,  one  or  more 
of  which  are  uow  very  frequently  included  in  a  mortgage  of  real  estate, 
by  way  of  additional  security  to  the  mortgagee.  They  are  inserted  im- 
mediately before  the  defeasance  clause,  and  in  place  of  the  asterisks  in 
the  last  form. 

(i.)  ^ttd  it  iiSi  licrebH  CUxptfiSiSiIy  ^gtetd,  that  in  case  any  itistallment 
of  principal,  or  atiy  part  thereof,  or  any  interest  moneys,  or  any  port 
iJiereof,  hereby  secured  to  he  paid,  or  any  money  paid  for  taxes,  assess- 
ments, or  insurance,  as  herein  specifed,  shall  remain  due  and  unpaid  by 
said  party  of  the  first  part,  his  heirs,  grantees  or  assigns,  for  the  space  of 
sixty  days  after  the  same  shall  by  the  terms  hereof  become  due  and  pay- 
able, that  then  and  in  that  case,  the  lohole  principal  sum  hereby  secured  to 
be  paid,  together  with  all  arrearage  of  interest  thereon,  shall,  at  the  option 
of  said  party  of  the  second  part,  his  executors,  administrators  or  assigns, 
become  due  and  payable  forthwith,  anything  herein  contained  to  the  con- 
trary notivithstanding. 

{2. )  ^nd  it  \^  nt^o  '^({XttA  by  and  betiueen  the  parties  to  these  presents, 
that  the  said  party  of  the  first  part,  his  heirs,  grantees  or  assigns,  shall 
and  will  keep  the  buildings  erected  and  to  be  erected  ujjon  the  lands  above 
conveyed  insured  in  some  solvent  incorporated  Fire  Insurance  Company, 
against  Loss  or  Damage  by  Fire,  in  an  amount  not  less  than  three  thous- 
and dollars,  the  insurers  to  be  chosen  or  approved  by  the  party  of  the 
second  part,  his  heirs,  executors,  administrators  or  assigns,  and  assign 
the  policy  and  certificate  thereof  to  the  said  party  of  the  secoiid  part,  his 
heirs,  executors,  administrator's  or  assigns.  And  171  default  thereof  it 
shall  be  lawful  for  the  said  party  of  the  second  part,  his  heirs,  executors, 
administrators  or  assigns,  to  effect  such  insurance,  as  mortgagee  or  other- 
wise, and  the  premium  or  premiums  paid  for  effecting  and  continuing  the 
same  shall  be  a  lien  on  the  said  mortgaged  premises,  added  to  the  amount 
secured  by  these  presents,  arid  forthwith  be  due  and  payable  witliout  demand, 
with  interest  from  the  time  of  such  payment,  and  shall  be  collectible  in  the 
same  manner,  and  upon  the  same  conditions  as  the  interest  hereinbefore 
mentioned. 

{3. )  ^nd  it  i^  Dicrclry  (gxpt'C^Sili)  itjjrcfdi,  by  arid  between  the  parties  to 
these  presents,  that  the  said  party  of  the  first  part,  his  heirs  or  assigns, 
will  pay  and  discharge  all  taxes  and  assessments  that  noiu  are  or  shall  here- 
after be  levied  or  assessed  upon  the  said  above  described  premises  or  any 
part  thereof,  when  the  same  become  due  arid  payable,  and  in  default  thereof, 
for  sixty  days  after  the  same  shall  be  so  levied  or  assessed,  and  become 
payable,  the  said  party  of  the  second  part,  his  heirs,  executors,  adminis- 
trators or  assigns,  may  pay  such  taxes  and  assessments,  and  expenses  of 


202  REAL   ESTATE   CONVEYANCES. 

the  same,  and  the  amount  so  paid,  and  the  interest  thereon,  from  the  time 
of  such  payment,  shall  forthwith  he  due  and  j)ayahle  loithout  demand  from 
the  said  party  of  the  first  part,  his  heirs  or  assigns,  to  the  said  second 
party  hereto,  his  heirs,  representatives  or  assigns,  by  virtue  hereof,  and 
the  same  shall  he  deemed  a  part  of  the  principal  sum  and  secured  ly  these 
presents,  and  shall  be  collectible  in  the  same  manner  and  on  the  same  con- 
ditions as  the  interest  on  the  2)rincipal  sum  hereinbefore  specified. 

Explanation  of  Clauses.— The  first  of  these  clauses  is  known  as 
the  interest  clause.  Its  effect  is  that  in  case  the  mortgageor  does  not 
make  every  payment  within  a  certain  specified  time,  which  the  parties 
may  agree  upon  —  usually  sixty  days — then  the  entire  amount  of  the 
debt  shall  become  at  once  due,  and  the  mortgagee  may  enforce  payment 
thereof.  With  this  clause  inserted,  if  Eeed  should  not  pay  his  interest 
or  the  first  payment  of  one  thousand  dollars  on  or  before  March  9th, 
1893,  then  the  whole  sum  of  three  thousand  dollars  would  be  due  at 

once. 

The  second  is  known  as  the  insurance  clause.  It  is  usually  made  to 
cover  the  amount  of  the  mortgage  if  the  value  of  the  buildings  equals 
or  exceeds  that  sum.  This  is  used  more  particularly  in  cities  where  the 
value  of  the  real  property  is  likely  to  be  largely  represented  by  the 
buildings. 

The  third  is  called  the  tax  and  assessment  clause.  This  makes  all 
unpaid  taxes  and  assessments  a  part  of  the  sum  secured  and  collectible 
like  the  interest.  The  effect  of  this  is  to  make  the  whole  amount  of  the 
mortgage  due  provided  the  mortgageor  should  fail  to  repay  to  the  mort- 
gagee the  amount  of  any  tax  paid  by  him  within  the  specified  number 
of  days  after  such  payment  by  the  mortgagee. 

Tlie  Debt.— It  follows  from  the  definition  that  a  mortgage  is  given 
as  collateral  security  and  usually  for  a  debt,  though  it  may  be  given  to 
secure  the  performance  of  some  act,  or  for  some  other  purpose.  When 
it  is  used  in  the  ordinary  way  the  debt  which  it  secures  is  usually  repre- 
sented by  a  bond,  or  one  or  more  promissory  notes,  according  to  the 
custom  of  the  state  in  which  the  property  is  located.  If  notes  are  used 
they  are  made  in  the  usual  form.  In  case  the  interest,  insurance,  tax 
and  assessment  clauses  are  embodied  in  the  mortgage,  they  should  also 
appear  in  the  bond.  The  following,  after  inserting  these  clauses,  is  the 
form  of  bond  to  which  the  foregoing  mortgage  would  be  collateral: 

Bond. 

^nouJ  at!  Pen  Ijy  thc;se  ^rciscnt.si,  that  I,  Oliver  D.  Reed,  of  Geneva, 
Ontario  County,  New  York,  am  held  and  firmly  bound  unto  Andrew 


MORTGAGES.  203 

/.  Wiitney,  of  Ithaca,  Tompkins  County,  Neio  York,  hi  the  sum  of 
six  thousand  dollars  ($G,000),  to  J)e  jjaid  to  the  said  Andrew  J.  Whitney, 
or  to  his  certain  attorney,  executors,  administrators  or  assig^is.  For  which 
payment,  ivell  and  truly  to  he  made  I  hind  myself  and  my  heirs^  executors 
or  administrators,  jointly  and  severally,  firmly  hy  these  presents. 

(pealed  this  tenth  day  of  January,  in  the  year  of  our  Lord  one  thousand 
nine  hundred  and  one. 

©he  (CoiuUtiou  of  \\\\$  ©UUgation  x^  ^>xt\  That  if  the  ahove  hounden 
Oliver  D.  Reed,  his  heirs,  executors  or  administ^'ators,  shall  and  do  luell 
and  truly  pay  or  cause  to  he  paid  unto  the  above  named  Andrew  J.  Whit- 
ney, or  to  his  certain  attorney,  executors,  administrators  or  assigns,  the 
sum  of  three  thousand  dollars  ($3,000),  in  three  equal  annual  payments, 
with  annual  i?iterest  on  all  sums  at  any  time  remaining  unpaid,  tvithout 
fraud  or  delay,  then  the pireceding  ohligalion  to  he  void ;  otherwise  to  remain 
in  full  force  and  virtue.  OLIVER  D.   REED.     [seal.'\ 

(Acknowledgment  same  as  in  mortgage.) 

If  a  real  debt  existed,  as  stated  in  the  mortgage,  a  bond  or  note  would 
not  be  necessary  to  enable  the  mortgagee  to  realize  the  amount  of  his 
claim  if  the  premises  were  worth  enough  to  satisfy  it.  But  his  rights 
stop  there,  while  if  he  has  a  bond  or  note  he  has  a  personal  claim  against 
the  mortgageor  and  may  sue  him  for  any  balance  left  due  after  the  sale 
of  the  premises,  and  the  appropriation  of  the  proceeds  to  the  payment 
of  his  debt. 

Sale  of  Mortgaged  Premises. — The  giving  of  a  mortgage  does  not 
prevent  the  mortgageor  from  selling  his  premises.  He  still  has  an  inter- 
est called  an  equity  of  redemption  which  he  may  sell.  He  conveys  the 
property  subject  to  the  mortgage,  and  this  should  be  made  to  appear  in 
the  deed  by  inserting  these  or  similar  words,  to  wit:  "  This  conveyance 
is  made  subject  to  a  certain  mortgage  made  by,"  etc.  {describing  it). 
Under  such  conveyance  the  grantee  must  pay  the  mortgage  debt  and 
interest  if  he  wishes  to  save  his  property,  but  he  incurs  no  liability 
otherwise  if  he  chooses  to  let  the  property  be  sold  under  the  mortgage. 
Very  frequently  it  is  agreed  that  the  grantee  shall  assume  the  payment 
of  the  mortgage.  This  is  effected  by  adding  to  the  clause  above  given 
after  the  description  of  the  mortgage,  these  or  similar  words:  "which 
said  mortgage  the  party  of  the  second  part  hereby  assumes  and  agrees 
to  pay  as  a  part  of  the  purchase  price  of  said  premises."  Accepting  a 
deed  containing  this  clause  binds  the  grantee  to  make  such  payment, 
and  should  he  fail  to  do  so  and  permit  the  property  to  be  sold  for  less 
than  the  amount  of  the  mortgage  debt,  he  would  be  liable  to  the  grantor 
for  damages,  and  could  be  sued  by  the  mortgagee  and  compelled  to  pay 
whatever  the  property  licked  of  bringing  enough  to  pay  the  debt. 


204  BEAL   ESTATE   CONVEYANCES. 

Assignment  of  Mortgage.  —  But  the  mortgagee  who  has  loaned 
money  may  wish  to  make  other  use  of  it.  In  that  case  he  may  sell  the 
mortgage,^  and  assign  it  to  the  purchaser,  who  thereupon  has  all  the 
rights  under  it  which  the  mortgagee  possessed.  The  purchaser  is  then 
known  as  the  assignee.  The  following  is  a  proper  form  of  assignment 
for  a  mortgage: 

Assignment  of  Mortgage. 

55hiSi  Ifns^tvumcttt,  made  tliis  2Jft1i  day  of  January,  1901,  hetioeen  An- 
dreiu  D.  Wliitney,  of  Itliaca,  Tompkins  County,  New  York,  of  the  first 
part,  and  John  Damning,  of  Dryden,  Tompkins  County,  Neiu  York,  of 
tlie  second  part. 

'^'\XXiX^$t\\\,  that  the  party  of  the  first  part,  for  a  good  and  valuable  con- 
sideration to  Mm  in  hand  paid  ly  the  said  party  of  the  second  part,  has 
sold,  assigned,  transferred  and  conveyed,  and  does  hereby  sell,  assign, 
transfer  and  convey,  to  the  party  of  the  second  part,  a  certain  mortgage, 
hearing  date  the  tenth  day  of  January,  1901,  made  by  Oliver  D.  Reed  to 
Andrev)  J.  Whitney,  to  secure  the  imyment  of  the  sum  of  three  thousand 
dollars  and  interest  thereon  from  the  date  thereof,  recorded  in  the  clerk's 
office  of  Tompkins  County,  in  liber  10  of  mortgages,  at  page  251,  on  the 
12th  day  of  January,  1901,  at  3  o'clock,  P.  M.,  together  tvith  the  bond 
accompanying  said  mortgage,  and  therein  referred  to,  and  all  siims  of 
money  due  and  to  groio  due  thereon.  A7id  the  party  of  the  first  part  hereby 
covenants  that  there  is  to  become  due  on  said  bond  and  mortgage,  the  sum 
of  three  thousand  dollars,  loith  interest. 

Kn  U'itnrs'S'  ivhcreof,  the  party  of  the  first  part  has  hereunto  set  his  hand 
and  seal  the  day  and  year  first  above  written. 

ANDREW  D.    WHITNEY,     [seal.'] 
(Acknowledgment  same  as  in  mortgage,  with  proper  change  of  names  and  date.) 

Recording. — The  rule  regarding  the  acknowledgment  and  recording 
of  mortgages  is  the  same  as  in  the  case  of  deeds.  In  order  to  he  binding 
against  subsequent  purchasers  without  notice  they  must  be  recorded. 

Discharge. — When  a  mortgage  has  been  paid  it  should  be  discharged 
of  record.  The  discharge  must  be  executed  by  the  mortgagee  if  he 
holds  the  mortgage  at  that  time,  but  if  not  then  by  the  assignee,  pro- 
vided the  assignment  was  recorded.  Sometimes  when  the  assignment  has 
not  been  recorded,  a  discharge  is  procured  from  the  mortgagee  to  save 
the  expense  of  recording  the  assignment  or  to  avoid  making  public  the 
fact  that  the  mortgage  had  ever  been  assigned.  It  is  not  the  duty  of 
the  holder  of  a  mortgage  to  prepare  a  discharge  when  the  mortgage  is 
paid,  because  he  has  no  interest  in  having  it  discharged.  He  is  bound, 
however,  to  execute  the  discharge  upon  request,  when  it  is  tendered  to 


MOETGAGES.  205 

him  ready  for  his  signature  and  acknowledgment.     The  following  is  a 
proper  form  for  a  discharge  by  the  assignee  of  the  foregoing  mortgage: 

DiSCHAKGE    OF   MORTGAGE. 

/,  John  Dunning,  of  Dryden,  Tompkins  County,  Neio  York,  assignee 
of  the  mortgage  hereinafter  described,  do  hereby  certify,  that  a  certain  in- 
dentiLre  of  mortgage,  bearing  date  the  tenth  day  of  January,  in  the  year 
of  our  Lord  one  thousand  eight  hundred  and  ninety-two,  made  and  executed 
by  Oliver  D.  Reed  to  Andrew  J.  Whitney,  and  thereafter  and  on  or  about 
the  ^Jfth  day  of  January,  1901,  by  an  instrument  in  writing,  duly  assigned 
to  me,  and  recorded  in  the  office  of  the  cleric  of  the  county  of  Tomphins,  in 
Liber  10  of  Mortgages,  at  page  251,  on  the  26th  day  of  January,  1901,  at 
3  o'clock,  P.  M.,  is  redeemed,  paid  off,  satisfied  and  discharged. 

Dated  the  1st  day  of  May,  1901, 

JOHN  D  UNNING.    [seal.  ] 

County  of  Tompkins,  f     ' 

On  this  first  day  of  May,  in  the  year  one  thousand  nine  hundred 
and  one,  before  me,  the  subscriber,  personally  a2jpieared  John  Dunning, 
-^^ — •  \      to  me  personally  Jcnoion  to  be  the  same  person  desci'ibed 
SEAL,  y      *'^'  ^^''^^  '^'^^^^  executed  the  ivithin  instrument,  and  he  ac- 
)      knoiuledged  that  he  executed  the  same. 

WALTER    WILSON, 

Justice  of  the  Peace. 

Foreclosure. — In  case  the  mortgageor  fails  to  pay  the  mortgage  debt 
when  due,  the  mortgagee  or  assignee  may  foreclose  the  mortgage.  The 
manner  of  doing  this  depends  upon  the  laws  of  the  state  in  which  the 
mortgaged  property  is  situated.  Ordinarily  it  may  be  foreclosed  by  an 
action  brought  in  some  court  of  the  state,  by  which  a  sale  of  the  prop- 
erty is  decreed.  This  is  the  method  most  generally  adopted,  and  is 
considered  the  preferable  one  by  the  larger  number  of  attorneys.  The 
legislatures  of  many  states  have  enacted  laws  providing  for  the  fore- 
closure of  mortgages  by  publication.  This  is  called  statute  foreclosure, 
and  requires  the  publication  in  a  newspaper  for  a  specified  length  of 
time,  of  a  notice  stating,  among  other  things,  the  amount  due  and  the 
time  and  place  of  sale.  The  result  is,  however,  in  either  case,  that  the 
premises  are  sold  and  the  proceeds  applied  to  the  payment  of  the  mort- 
gaged debt.  If  any  balance  remain  it  is  paid  to  the  mortgageor  or  his 
grantee  having  title  to  the  premises.  In  case  the  property  does  not 
bring  the  amount  of  the  debt,  a  judgment  is  rendered  against  the  mort- 
gageor for  the  remainder  and  his  other  property  may  be  sold  to  satisfy  it. 


206  REAL   ESTATE   COITVETANCES. 

Deed  of  Trust. — In  some  of  the  states  what  is  known  as  a  deed  of 
trust  is  used  instead  of  a  mortgage.  It  is  an  absolute  conveyance  of 
the  premises  in  trust  for  the  benefit  of  the  creditor,  to  some  third  party 
called  a  trustee.  In  case  of  the  debtor's  default  in  payment  the  trustee 
is  authorized  to  sell  the  property  according  to  law,  and  satisfy  the  cred- 
itor's claim  out  of  the  proceeds  of  such  sale.  It  is  in  effect  a  mortgage. 
It  is  not,  however,  assigned  in  the  same  manner.  It  is  usually  collateral 
to  a  promissory  note,  which  is  transferred  by  indorsement  and  carries 
with  it  all  rights  of  security  under  the  deed  of  trust. 

Execution. — "What  has  been  said  in  regard  to  the  execution  and  de- 
livery of  deeds  applies  substantially  to  mortgages,  deeds  of  trust,  and 
in  fact  to  assignments  and  discharges  of  mortgage. 

Subsequent  Mortgage. — The  fact  that  premises  have  been  mort- 
gaged docs  not  prevent  mortgaging  them  repeatedly  thereafter,  but  the 
rights  of  subsequent  mortgagees  are  inferior  to  those  of  the  first.  The 
holder  of  any  mortgage  may  foreclose  it,  but  he  cannot  affect  the  rights 
of  prior  mortgagees,  though  he  does  thus  destroy  or  cut  off  the  claim 
and  lien  of  all  subsequent  mortgagees.  Hence  the  owner  of  a  subse- 
quent mortgage  must  purchase  the  premises  when  sold  under  a  prior 
mortgage  to  protect  himself.  Mortgages  take  precedence  of  each  other, 
therefore,  in  the  order  of  their  priority  in  execution,  delivery  and  record. 
But  taxes  are  first  liens  without  reference  to  the  date  when  they  became 
due,  and  take  precedence  of  all  other  incumbrances. 

QUESTIONS. 

Define  mortgage.  What  are  the  parties  called?  Distinguish  between 
deed  and  mortgage.  What  clauses  in  addition  to  the  defeasance  clause 
are  sometimes  inserted?  Define  each.  What  is  said  of  the  debt  for 
which  a  mortgage  may  be  given.  How  is  it  evidenced?  What  is  said  of 
the  sale  of  mortgaged  premises?  What  is  the  effect  of  assuming  a  mort- 
gage? What  is  said  of  the  assignment  of  a  mortgage?  What  is  the 
rule  regarding  the  recording  of  mortgages?  How  and  by  whom  is  a 
mortgage  discharged?  What  is  foreclosure?  give  process.  What  is 
a  deed  of  trust?     What  is  said  of  subsequent  mortgages? 


I 


CHAPTER  XLI. 


LANDLORD  AND  TENANT. 


Definitions. — The  owner  of  real  property  may  do  what  he  pleases 
with  it,  and  he  may  therefore  let  or  rent  it  to  some  other  person.  This 
he  ordinarily  does  for  a  specified  time,  but  it  may  be  for  an  indefinite 
time.  Such  renting  establishes  the  relation  of  landlord  and  tenant. 
The  owner  is  then  known  as  the  landlord  or  lessor,  and  the  person  to 
whom  he  has  let  the  premises  as  the  tenant  or  lessee.  The  compensa- 
tion agreed  to  be  paid  by  the  tenant  to  the  landlord  for  the  use  of  the 
premises  is  usually  termed  the  rent;  and  the  contract  between  the  parties 
is  called  a  lease. 

Execution. — Under  the  Statute  of  Frauds  leases  of  land  for  more 
than  one  year  are  void  unless  made  in  writing.  Leases  for  one  year  or 
less  may  be  oral;  and  such  leases  are  vah'd,  although  the  year  is  to  com- 
mence at  a  future  day,  as  where  an  agreement  is  made  in  February  by 
which  property  is  leased  for  a  year  from  the  first  day  of  April  following. 
In  some  states,  however,  the  statute  has  been  so  changed  that  a  lease 
need  not  be  in  writing  unless  it  is  for  more  than  three  years.  Leases 
are  sometimes  executed  under  seal;  and  they  are  often  acknowledged, 
which,  although  desirable,  is  not  necessary  unless  they  are  to  be  recorded. 
The  laws  of  some  states  provide  that  leases  for  more  than  a  specified 
number  of  years  must  be  recorded  in  order  to  fully  protect  the  tenant's 
interests.  The  lease  is  ordinarily  signed  by  both  parties,  and  should 
always  be  executed  in  duplicate  in  order  that  each  party  may  have  one 
of  them.  In  some  localities  it  is  customary  to  have  the  lease  left  with 
some  third  person  for  the  benefit  of  the  parties  to  it. 

The  following  is  an  ordinary  form  of  lease: 

Lease. 

^  '^tn&tf  made  and  executed  let  ween  Richard  Howard,  of  the  city 
of  Aiit)2irn,  Keio  York,  of  the  first  part,  and  Lyman  Smith,  of  the  town 
of  Venice,  Cayuga  County,  New  York,  of  the  second  part,  the  4ih  day  of 
February,  in  the  year  of  our  Lord  one  thousand  nine  hundred  and  one. 

207 


208  LANDLORD    AND   TENANT. 

Kn  ^HomSidetatiOtt  of  the  rents  and  covenants  hereinafter  expressed,  the 
said  party  of  the  first  part  has  demised  and  leased,  and  does  hereby  demise 
and  lease  to  the  said  party  of  the  second  part  the  folloiving  premises,  viz: 
Ms  farm,  consisting  of  one  hundred  and  fifty  acres  of  land,  situate  two 
miles  east  of  Northville,  in  the  town  of  Genoa,  Cayuga  County,  N.  Y., 
with  the  privileges  and  appurte^iances,  for  and  during  the  term  of  ttvo 
years,  from  the  first  day  of  April,  1901,  which  term  will  end  March  31st, 
1903.     A7id  the  said  party  of  the  second  part  covenants  that  he  will  pay 
to  tlie  party  of  the  first  part,  for  the  use  of  said  premises,  the  annual  rent 
of  five  hundred  dollars,  to  he  paid  in  two  equal  payments  of  two  hundred 
and  fifty  dollars  each,  on  the  first  days  of  September  and  March.     And 
provided  said  party  of  the  second  part  shall  fail  to  pay  said  rent,  or  any 
part  thereof,  when  it  becomes  due,  it  is  agreed  that  said  party  of  the  first 
part  may  sue  for  the  same,  or  re-enter  said  premises,  or  resort  to  any  legal 

remedy. 

The  party  of  the  first  part  agrees  to  pay  all  taxes  to  be  assessed  on  said 
premises  during  said  term. 

The  party  of  the  second  part  covenants  that  at  the  expiration  of  said 

term  he  will  surrender  said  premises  to  the  party  of  the  first  part  in  as 

good  condition  as  noio,  necessary  wear  and  damage  by  the  elements  excepted. 

W\Xw^^  the  hands  and  seals  of  the  said  jMrties  in  duplicate,  the 

day  and  year  first  above  ivritten. 

RICHARD  HOWARD,     [seal.] 
In  presence  of  LYMAN  SMITH.  [seal.] 

A.  J.  Conger,  Auburn,  N.  Y. 

The  Term,  that  is,  the  time  for  which  the  lease  is  given,  is  usually 
a  matter  of  agreement  between  the  parties,  and  may  generally  be  as  long 
or  as  short  as  they  please.  There  are,  however,  some  exceptions  to  this 
18  the  result  of  statute  restrictions,  as  in  New  York,  where  a  lease  of 
farm  lands  is  not  legal  for  more  than  twelve  years.  When  the  term  is 
not  specified  in  the  lease,  the  law  will  usually  presume  that  it  was  a 
rentino-  from  year  to  year,  and  the  landlord  cannot  remove  the  tenant 
until  the  expiration  of  a  year.  And  where  a  tenant  has  been  in  posses- 
sion of  premises  under  a  lease  for  one  or  more  years,  and  after  its  expi- 
ration continues  in  such  possession,  the  law  will  in  like  manner  presume 
a  tenancy  from  year  to  year. 

The  Kent  is  usually  specified  in  the  lease,  whether  oral  or  written, 
as  well  as  the  time  when  it  is  to  be  paid.  Sometimes  also  the  place 
where  payment  is  to  be  made  is  stated,  but  if  the  lease  be  silent  in  re- 
gard to  that,  it  will  be  payable  upon  the  land.  Eent  may  be  made  pay- 
able at  such  times  as  the  ^larties  ag^ee  unon,  but,  except  in  case  of  farm 


LANDLORD    AND   TENANT.  209 

lands,  in  by  far  the  larger  number  of  leases  it  is  made  payable  monthly, 
and  it  is  in  such  cases  not  due  until  the  end  of  the  month,  unless  there 
be  a  special  provision  making  it  payable  in  advance.  If  a  tenant  be  in 
possession  of  premises  without  any  agreement  as  to  the  amount  of  rent 
to  be  paid,  the  law  will  give  the  landlord  a  reasonable  compensation. 

Lessor's  Rights.— 'J'he  landlord  has  a  right  to  insist  upon  the  'per- 
formance of  all  of  the  conditions  of  the  lease.  He  has  no  right  to  inter- 
fere with  the  proper  use  of  the  premises  by  the  tenant,  but  he  may 
prevent  him  from  committing  waste,  that  is,  doing  anything  which  will 
permanently  injure  the  property.  If  the  rent  is  not  paid  or  the  tenant 
does  not  remove  from  the  premises  at  the  expiration  of  his  term,  he 
may,  under  the  laws  of  most  of  the  states,  recover  possession  of  the 
property  by  what  are  usually  termed  summary  proceedings.  They  are  so 
called  because  the  tenant  may  be  removed  summarily  by  an  order  of  a 
court  or  justice.  Ordinarily  a  tenant  may  be  thus  removed  within  two 
or  three  days.  Formerly  the  landlord,  in  case  of  nonpayment  of  rent, 
could  seize  any  personal  property  found  on  the  premises  to  enforce  the 
payment  of  rent.  This  was  known  as  distress  for  rent,  but  it  is  not  now 
generally  allowed,  the  remedy  of  evicting  the  tenant  by  summary  pro- 
ceedings having  taken  the  place  of  it. 

The  landlord,  having  only  parted  with  the  right  to  possession,  yet 
retains  the  title,  and  he  may  therefore  mortgage  the  premises  or  sell 
them,  but  the  grantee  or  mortgagee  takes  subject  to  the  tenant's  rights. 

Lessee's  Rig-lits. — The  tenant  has  a  right  to  the  possession  and  en- 
joyment of  the  premises  to  such  an  extent  that  the  landlord  can  no 
more  enter  upon  the  property  without  his  permission  than  a  stranger, 
unless  the  privilege  be  reserved  in  the  lease.  But  if  the  landlord  have 
not  a  good  title  to  the  premises,  and  the  tenant  should  be  evicted,  that 
is,  removed  from  them  through  due  process  of  law  by  one  having  a 
better  title  than  the  landlord,  he  must  abide  the  result  and  lose  all 
rights  under  his  lease.  The  landlord  could  give  him  no  better  claim  to 
the  property  than  he  himself  possessed.  This  is  the  case  where  a  tenant 
rents  property  already  covered  by  a  mortgage.  If  the  mortgagee  fore- 
closes his  mortgage,  the  tenant  may  be  removed,  notwithstanding  his 
lease  has  not  expired.  But  in  all  such  cases  the  tenant  is  relieved  from 
his  agreement  to  pay  rent  to  the  landlord.  Sometimes  the  lessor  agrees 
to  defend  the  tenant  in  the  possession  of  the  premises,  and  in  such  case 
an  eviction  of  the  tenant  by  some  one  holding  a  better  title  might  make 
the  lessor  liable  for  damages. 

He  has  a  riglit  to  use  the  property  in  a  proper  manner.  If  there  be  a 
wood-lot  on  a  rented  farm,  the  tenant  will  be  entitled  to  procure  there- 
from necessary  wood  for  fuel,  but  he  cannot  cut  wood  for  sale,  or  to  be 
used  except  on  the  premises.     A  tenant  who  holds  for  an  uncertain 


210  LANDLOED   AND   TENANT. 

time,  as  a  tenant  for  life,  is  entitled  to  all  the  crops,  called  emblements, 
which  are  on  the  ground  when  his  lease  is  terminated,  because  he  could 
not  tell  when  this  might  happen,  and  hence  could  not  provide  for  it  in 
advance.  On  the  contrary,  where  his  term  is  definite,  the  general  rule 
is  that  he  is  not  entitled  to  such  emblements.  For  example,  a  tenant 
whose  lease  will  expire  in  the  spring,  cannot  usually  hold  the  crop  grown 
from  winter  wheat  sown  the  preceding  autumn,  without  a  special  agree- 
ment to  that  efifect,  though  in  some  states  he  is  entitled  to  a  crop  thus 
grown. 

The  tenant  may  also  sell  his  interest,  sometimes  called  lease-hold  in- 
terest, in  the  absence  of  any  agreement  to  the  contrary  in  his  lease.  He 
may  do  this  by  sub-letting,  or  he  may  assign  his  lease.  By  the  first 
method  he  stands  in  the  position  of  a  landlord  to  the  new  tenant,  who 
has  no  dealings  with  the  owner,  and  in  the  second  the  new  tenant  takes 
the  place  of  the  former  one  and  pays  his  rent  to  the  landlord,  but  in 
neither  case  is  the  first  tenant  relieved  from  liability  to  his  landlord. 
It  is  quite  customary  to  insert  a  clause  in  leases  by  which  the  tenant 
covenants  not  to  sub-let  the  premises  or  any  part  thereof,  or  assign 
the  lease  without  the  consent  of  the  landlord.  Some  states  provide  by 
statute  that  the  tenant  shall  not  sub-let  without  the  landlord's  consent 
if  the  lease  is  for  a  short  term,  two  or  three  years. 

Repairs. — Unless  there  is  a  special  agreement  to  that  effect,  the 
landlord  is  not  bound  to  make  repairs,  no  matter  how  uninhabitable  the 
premises  may  become.  If  any  repairs  are  needed  the  tenant  must  make 
them  at  his  own  expense,  or  do  without  them.  When  such  repairs  are 
necessary  to  put  and  keep  the  premises  in  as  good  condition  as  when 
rented,  except  for  ordinary  wear,  then  the  tenant  must  make  them. 
This  requires  him  to  replace  broken  glass,  keep  up  fences,  and  the  like. 
But,  even  if  he  has  covenanted  in  his  lease  to  repair,  he  need  not  make 
good  damages  caused  by  fire  or  other  inevitable  accidents. 

Fixtures. — Very  important  questions  frequently  arise  between  land- 
lord and  tenant  in  regard  to  fixtures.  In  general  whatever  a  person 
builds  upon  or  into  the  property  of  another  belongs  to  the  latter,  but 
this  rule  has  been  considerably  modified  in  its  application  to  landlords 
and  tenants.  A  tenant  may  remove  things  that  he  has  annexed  to  the 
land  or  buildings  for  the  purpose  of  trade  or  manufacture,  unless  the 
same  are  built  or  fixed  into  the  wall  of  a  building  so  as  to  be  essential 
to  its  support.  A  tenant  who  makes  additions  to  the  property  or  im- 
provements upon  it  for  his  own  better  use  of  the  same,  may  remove 
such  additions  or  fixtures,  provided  such  removal  will  not  leave  the 
premises  in  a  worse  condition  than  they  were  when  he  took  possession. 
Such  removal  must  be  made  before  his  term  expires,  or  he  will  be  held 
to  have  waived  his  right. 


LANDLORD   AND  TENANT.  211 

Recovering  Possession.  —  Under  an  ordinary  lease  like  the  one 
given  in  the  text,  when  the  term  expires  the  landlord  is  entitled  to  pos- 
session, and  the  tenant  must  remove,  and  if  he  does  not  the  landlord 
may  remove  him  by  summary  proceedings.  But  when  the  term  is 
indefinite,  or  where  by  agreement  or  presumption  of  law  the  letting  is 
from  year  to  year,  the  tenancy  cannot  be  terminated  by  either  party 
without  giving  to  the  other  six  months'  notice,  or  such  other  notice  as 
may  be  prescribed  by  the  statutes  of  the  particular  state.  In  the  absence 
of  statutory  provisions,  it  must  be  a  six  months'  notice.  Where  the  rent- 
ing is  by  the  month  it  is  usually  necessary  to  give  a  month's  notice,  and 
similarly  a  week's  notice  in  case  the  renting  is  by  the  week.  The  land- 
lord cannot  evict  the  tenant  without  giving  such  notice,  and  if  the  ten- 
ant leaves  or  sub-lets  the  premises  without  having  given  the  necessary 
notice,  the  landlord  may  still  hold  him  for  the  payment  of  rent  unless 
he  accepts  the  surrender,  or  adopts  the  sub-tenant,  by  receiving  rent 
from  him.  The  following  is  a  proper  form  of  notice  from  landlord  to 
tenant  for  the  purpose  of  terminating  a  tenancy  from  year  to  year,  or 
for  an  indefinite  time.  It  may  be  readily  varied  to  suit  the  case,  where 
the  renting  is  for  a  shorter  period. 

NOTICE    TO   QUIT. 

I  hereby  give  you  notice  to  quit  and  deliver  up  on  the  first  day  of  April 
next,  the  possession  of  the  farm  which  you  now  hold  of  me  as  a  tenant. 

Dated  Jan.  11,  1901. 
To  A.  a  Kendall,  JAMBS  M.  BANCROFT, 

Tenant.  Landlord. 

The  following  would  be  a  proper  form  of  notice  from  the  same  tenant 
to  his  landlord: 

NOTICE  TO  LANDLORD. 

I  hereby  give  you  notice,  that  I  shall  quit  and  deliver  up  on  the  -first  day 
of  April  next,  the  possession  of  the  farm  which  I  now  hold  of  you  as  a  tenant. 

Dated  Jan.  11,  1901. 
To  James  A.  Bancroft,  A.  C.  KENDALL, 

Landlord,  Tenant. 

QUESTIONS. 

Define  landlord;  tenant.  What  is  the  rent?  Define  lease;  how  may 
it  be  made?  what  should  it  contain?  What  is  said  regarding  the  term? 
the  rent?  What  rights  has  the  lessor?  lessee?  What  is  said  regarding 
repairs?  fixtures?  How  may  the  landlord  recover  possession?  To  what 
notice  is  the  tenant  entitled? 


A.F»I^E]SrDIX. 


CHAPTEE   XLII. 


COURTS. 


Object. — The  different  branches  of  law  of  which  we  have  treated  in 
the  foregoing  chapters,  simply  define  the  rights  of  individuals  in  the 
difierent  branches  of  business.  But  merely  to  define  a  person's  rights 
is  not  sufficient  to  secure  him  in  their  enjoyment.  Some  means  must 
be  provided  to  enforce  a  recognition  of  others'  rights  on  the  part  of 
those  who  are  disposed  to  violate  them,  and  this  means  we  have  in  the 
courts  of  the  country.  In  this  country  everyone  lives  under  two  gov- 
ernments, and  is  subject  to  two  kinds  of  law,  state  and  national,  conse- 
quently it  is  necessary  to  have  two  different  kinds  of  courts,  and  these 
we  have  in  our  state  courts  and  federal  courts. 

Jurisdiction. — By  the  term  jurisdiction  is  meant  the  power  to  hear 
and  determine  a  case.  The  law  provides  that  if  a  dispute  over  some 
fact  arises  between  two  individuals,  the  power  to  decide  it  shall  be 
vested  in  a  certain  court.  This  court  then  has  jurisdiction  over  it. 
There  are  two  general  kinds  of  jurisdiction,  original  and  appellate. 
By  original  jurisdiction  is  meant  the  power  to  hear  the  case  first.  Ap- 
pellate jurisdiction  is  the  power  to  decide  a  case  that  is  brought  to  it 
from  another  court  after  having  been  decided  by  that  court. 

Federal  Courts. — For  the  purpose  of  interpreting  and  applying  the 
Constitution  of  the  United  States,  and  the  laws  and  treaties  made  in 
pursuance  of  it,  the  constitution  provides  a  judicial  department  which 
shall  be  vested  in  one  supreme  court  and  such  inferior  courts  as  congress 
may  from  time  to  time  establish.  In  pursuance  of  this  power  congress  has 
established  three  grades  of  courts  inferior  to  the  supreme  court,  so  that 
there  are  four  classes  of  federal  courts,  viz:  Supreme  Court,  Courts 
of  Appeal,  Circuit  Courts,  and  District  Courts.  The  constitution  fur- 
ther provides  that  the  judicial  power  of  the  United  States  shall  extend 
to,  that  is  the  United  States  courts  shall  have  jurisdiction  over,  all 
oases  arising  under  the  constitution,  laws,  and  treaties  of  the  United 
States;  to  all  ca/?es  affecting  ambassadors  and  other  public  ministers,  and 

213 


COURTS.  213 

consuls;  to  all  cases  of  admiralty  and  maritime  jurisdiction;  to  all  cases 
in  which  the  United  States  or  a  state  shall  be  a  party;  to  controversies 
between  citizens  of  different  states,  or  citizens  of  the  same  state  claiming 
lands  under  grants  of  different  states;  and  between  a  state  or  citizens 
thereof,  and  foreign  states,  citizens  or  subjects. 

Supreme  Court.— The  Supreme  Court  is  the  highest  judicial  tri- 
bunal known  to  this  country.  It  is  comjoosed  of  one  chief  justice  and 
eight  associate  justices,  appointed  by  the  president  of  the  United  States, 
by  and  with  the  consent  of  the  senate.  They  hold  office  for  life,  or 
during  good  behavior.  The  Supreme  Court  has  original  jurisdiction 
in  all  cases  affecting  ambassadors  and  other  public  ministers  and  con- 
suls, and  cases  in  which  a  state  shall  be  a  party.  In  all  the  other  cases 
before  mentioned,  the  Supreme  Court  has  appellate  jurisdiction,  with 
such  exceptions  and  under  such  regulations  as  congress  may  make. 
The  Supreme  Court  being  the  highest  court  in  the  country  is  intended 
merely  as  a  court  of  last  resort,  and  consequently  most  of  the  cases 
tried  in  this  court  are  brought  there  from  a -lower  court  througli  this 
appellate  jurisdiction. 

Courts  of  Appeal. — In  order  to  relieve  the  supreme  court  of  part 
of  its  work  and  enable  it  to  catch  up  with  the  work  it  had  on  hand, 
congress  has  recently  established  nine  courts  of  appeal.  These  courts 
meet,  one  in  each  judicial  circuit,  for  the  purpose  of  exercising  appel- 
late jurisdiction  over  many  of  the  less  important  cases  that  have  here- 
tofore been  carried  to  the  supreme  court.  Cases  arising  out  of  patent 
law,  revenue  law,  and  many  other  cases  not  involving  very  important 
interests,  are  decided  finally  by  these  courts,  thus  relieving  the  supreme 
court  of  a  large  amo^^nt  of  work. 

Circuit  Courts. — The  United  States  is  divided  into  nine  judicial 
circuits,'  with  a  circuit  judge  for  each  circuit,  and  a  circuit  court  is 
held  in  the  capital  of  each  state.  The  circuit  courts  have  original 
jurisdiction  over  crimes  of  a  serious  nature  committed  against  the 
United  States,  and  over  civil  cases  involving  important  interests,  and  it 
has  appellate  jurisdiction  over  certain  classes  of  cases  from  the  district 
courts  and  from  the  state  courts. 


>  The  judicial  circuits  are  as  follows:  1.  Maine,  New  Hampshire,  Massachusetts 
and  Rhode  Island;  2.  Vernaont,  Connecticut  and  New  York;  3.  New  Jersey,  Penn- 
sylvania and  Delaware;  4.  Maryland,  West  Virginia,  Virginia,  North  Carolina 
and  South  Carolina;  5.  Georgia,  Florida,  Alabama,  Mississippi,  Louisiana  and 
Texas;  6.  Ohio,  Michigan,  Kentucky  and  Tennessee;  7.  Indiana,  Illinois  and 
Wisconsin;  8.  Minnesota,  Iowa,  Missouri,  Kansas,  Arkansas,  Nebraska,  Colorado, 
North  Dakota,  South  Dakota  and  Wyoming;  9.  California,  Oregon,  Nevada,  Mon- 
tana, Washington  and  Idaho. 


214  APPEISTDIX. 

District  Courts.— The  United  States  is  divided  into  sixty-three 
districts,  in  each  of  which  a  district  court  is  held,  presided  over  by  a 
district  judge.  No  state  constitutes  less  than  a  whole  district,  while 
some  are  divided  into  two  and  some  into  three  districts.'  The  district 
courts  have  original  jurisdiction  over  crimes  against  the  laws  of  the 
United  States  where  the  punishment  does  not  exceed  a  fine  of  five 
hundred  dollars,  or  six  months'  imprisonment,  and  over  a  large  number 
of  different  kinds  of  civil  cases  not  involving  very  important  interests. 
State  Courts,— As  we  have  seen,  the  United  States  courts  only  have 
jurisdiction  over  certain  classes  of  cases  which  are  specially  enumerated, 
and  these  are  all  cases  of  a  national  character,  or  cases  that  properly 
belong  to  the  federal  courts.  The  larger  part  of  cases,  both  civil  and 
criminal,  are  merely  local,  and  for  the  trial  of  these  each  state  has 
its  own  local  courts.  There  are  usually  four  grades  of  state  courts, 
Supreme,  District  or  Circuit,  Justices  of  the  Peace,  and  Probate. 

Supreme  Court. — The  supreme  courts  in  the  states  like  the  United 
States  supreme  court,  are  principally  courts  of  appellate  jurisdiction, 
having  original  jurisdiction  in  but  very  few  cases.  The  supreme  court 
consists  of  a  number  of  judges,  from  three  to  five,  and  even  more,  usu- 
ally elected  by  the  people  for  a  term  of  years.  The  supreme  court  is 
the  highest  court  in  the  state,  and  its  decision  of  a  case  is  final,  unless 
it  should  involve  a  question  which  allows  it  to  be  taken  to  the  United 
States  courts.  In  some  states  the  business  of  the  supreme  court  has 
become  so  heavy  that  a  court  of  appeals  has  been,  established  for  the 
purpose  of  deciding,  finally,  cases  not  involving  very  important  interests 
or  questions. 

District  Courts. — The  states  are  divided  into  districts,  or  circuits  as 
they  are  called  in  some  states,  each  of  which  has  its  own  court.  These 
districts  are  composed  sometimes  of  one  county  and  sometimes  of 
several,  and  where  a  district  is  composed  of  several,  court  is  held  in 
each  county.  These  courts  bear  about  the  same  relation  to  the  judicial 
department  of  the  state  that  the  circuit  courts  do  to  the  United  States. 
They  have  original  jurisdiction  over  the  more  important  civil  and 
criminal  cases  and  appellate  jurisdiction  over  cases  brought  from  the 
lower  courts.  Sometimes  where  a  district  has  a  large  amount  of  busi- 
ness it  has  two  courts,  one  for  the  less  important  and  the  other  for  the 
more  important  cases. 


^  The  districts  are  constituted  as  follows:  Alabama,  New  York  and  Texas  each 
have  three  districts;  Arkansas,  Florida,  Georgia,  Illinois,  Michigan,  Mississippi, 
Missouri,  North  Carolina,  Ohio,  Pennsylvania.  Tennessee,  Virginia  and  Wisconsin 
two  each;  all  other  states  one  each. 


COUETS.  215 

Justice's  Courts. — Justices  of  the  peace  are  oflBcers  elected  in  each 
township  for  the  purpose  of  holding  township  courts.  These  courts 
being  the  lowest  in  the  state  have  no  appellate  jurisdiction,  but  have 
original  jurisdiction  over  crimes  with  only  small  penalties  attached, 
and  in  civil  cases  where  the  amount  in  controversy  is  small,  the  limit 
being  usually  about  three  hundred  dollars. 

Probate  Courts,  presided  over  by  a  probate  judge,  are  held  in  each 
county.  They  have  jurisdiction  only  over  special  classes  of  cases. 
They  have  charge  of  the  estates  of  deceased  persons,  appoint  adminis- 
trators, guardians  for  minors,  and  in  their  office  wills  are  filed.  They 
hold  inquisitions  of  lunacy  and  drunkenness  in  many  states,  and  ap- 
point guardians  for  lunatics  and  habitual  drunkards. 

Officers. — In  addition  to  the  judges  there  are  quite  a  number  of 
other  officers  connected  with  these  courts. 

The  Clerk  has  charge  of  the  records  and  the  seal  of  the  court,  issues 
papers  connected  with  the  busines  of  the  court,  such  as  summons  for 
the  party  who  has  been  sued,  subpoenas  for  witnesses  and  jurors,  war- 
rants for  the  arrest  of  criminals,  etc. 

The  Sheriff  is  the  executive  officer  of  the  court  serving  the  sum- 
mons, subpoena,  warrant,  etc.  The  executive  officer  of  a  justice's  court 
is  called  a  constable,  and  of  the  United  States  courts  a  marshall. 

The  Bailiff  keeps  order  in  the  court  room  during  the  session  of  the 
court,  calls  witnesses  and  jurors  into  court,  and  has  charge  of  the  jury 
while  they  are  deliberating  over  their  verdict. 

Attorneys,  or  lawyers,  are  men  educated  in  the  law,  who  make  it 
a  business  to  conduct  cases  for  others.  A  person  has  a  perfect  right  to 
conduct  his  own  case  if  he  so  desires,  but  since  to  properly  conduct  a 
case  requires  a  legal  education,  it  is  seldom  done  except  by  lawyers  hired 
for  the  purpose. 

The  Stenographer  is  a  shorthand  writer  who  takes  down  in  short- 
hand the  proceedings  of  the  court,  such  as  the  testimony  of  the  wit- 
nesses, including  the  questions  of  the  lawyers,  the  objections  of  the 
lawyers  and  decisions  of  the  judge.  In  case  the  suit  is  carried  to  a 
higher  court,  all  these  things  are  written  out  in  order  that  the  court  to 
which  it  is  appealed  can  know  just  what  transpired  in  the  court  below. 

The  Reporter  is  the  officer  Avho  prepares  the  proceedings  of  the 
supreme  court  and  some  other  courts  for  publication.  In  these  courts 
the  arguments  of  the  lawyers  and  decisions  of  the  judges  are  made  in 
writing,  and  the  reporter  collects  these,  arranges  them,  and  when  he 
has  enough  for  a  volume  has  them  printed. 

Terms.  —  Most  of  these  courts  have  a  certain  time  for  meeting. 
Some  of  them  meet  once  in  each  year,  and  others  two  or  three  and  even 


216 


APPENDIX. 


more  times.  Each  regular  meeting  of  a  court  is  called  a  term,  and  is 
spoken  of  as  the  October  term  or  the  December  term,  according  to  the 
mouth  of  beginning.  A  term  lasts  until  the  business  of  the  court  is 
done  or  it  adjourns  for  the  term  without  completing  it  work. 

QUESTIONS. 

What  are  the  objects  of  courts?  What  is  meant  by  jurisdiction? 
What  kinds  are  there?  What  two  kinds  of  courts  have  we?  What  are 
federal  courts?  What  grades  are  there?  Define  each.  What  are  state 
courts?  What  grades  are  there?  Define  each?  What  officers  are  con- 
nected with  the  courts  beside  the  judges?  Give  the  duties  of  each.  What 
is  a  term  of  court? 


A 


OHAPTEE  XLIII. 


PLEADING    AND    PRACTICE. 


Actions. — As  we  have  seen,  the  hiw  provides  for  enforcing  rights 
and  redressing  wrongs  by  actions.  For  the  welfare  of  society,  men  are 
not  allowed  to  enforce  their  own  rights  and  redress  their  own  wrongs, 
but  courts  are  established  for  this  purpose,  and  an  action  is  simply  a 
process  by  which  a  court  arrives  at  a  decision  as  to  whether  a  right  has 
been  violated  or  an  injury  suffered.  There  are  two  general  kinds  of 
actions,  criminal  and  civil. 

Criminal  Actions  are  the  means  provided  for  determining  and  pun- 
ishing violations  of  the  criminal  law.  It  is  sometimes  difficult  to  tell 
from  the  nature  of  an  act  itself  whether  it  is  a  crime  or  a  tort,  but  the 
kind  of  action  by  which  it  is  redressed  always  determines  this.  In  a 
criminal  action  the  theory  is  that  the  individual  has  wronged  society, 
consequently  the  state  or  the  United  States  takes  up  the  case  and  prose- 
cutes it  for  the  injured  party,  and  the  remedy  is  not  a,  payment  of 
money  to  the  injured  party,  but  simply  a  punishment  by  fine,  imprison- 
ment, or  otherwise,  of  the  criminal.  Since  the  criminal  Liw  is  outside 
the  scope  of  this  book,  criminal  actions  need  not  be  considered  any 
farther. 

Civil  Actions  are  the  means  provided  for  determining  and  enforcing 
private  rights  and  redressing  private  wrongs.  One  man  owes  a  debt  to 
another  which  he  refuses  to  pay.  The  injured  party  makes  a  statement 
of  this  fact  in  the  proper  manner  to  the  proper  court.  The  court  hears 
both  sides  of  the  case  and  decides  the  question.  This  is  a  civil  action 
because  one  individual  comes  before  the  court  and  asks  that  a  private 
right  be  enforced.  Under  the  common  law  there  were  a  large  number 
of  different  kinds  of  civil  actions;  each  different  kind  of  injury  having 
a  special  kind  of  action  by  which  it  was  redressed.  These  large  numbers 
of  different  forms  caused  a  great  deal  of  needless  work  and  confusion, 
so  that  many  states  have  passed  laws  abolishing  them  and  providing 
that  all  kinds  of  private  injuries  shall  be  redressed  by  one  kind  of 
action. 

Parties. — Of  course,  there  must  be  two  parties  to  every  action;  the 
party  who  brings  the  action,  known  as  the  plaintiff,  and  the  party 

217 


218  PLEADING    AND    PRACTICE. 

against  whom  the  action  is  brought,  known  as  the  defendant.  In  a 
criminal  action  the  phiintiff  is  always  the  State  or  the  United  States,  and 
the  defendant  is  the  one  accused  of  crime.  Anyone  competent  to  sue  or 
be  sued  may  be  a  party  in  a  civil  action.  The  rules  as  to  competency  are 
about  the  same  as  in  parties  to  a  contract.  Persons  who  are  incompe- 
tent, however,  if  they  desire  to  bring  a  suit,  may  sometimes  have  a 
guardian  appointed  for  this  purpose,  and  then  they  may  bring  suit  the 
same  as  though  competent. 

Garnishee. — Sometimes  in  a  suit  to  recover  money,  a  third  party, 
called  a  garnishee,  is  brought  in.  A  garnishee  is  an  outside  party 
supposed  to  owe  the  defendant  money,  who  is  ordered  not  to  pay  that 
money  to  tjie  defendant  but  to  pay  it  into  court,  or  keep  it  subject  to 
the  order  of  the  court.  Suppose  A  sues  B  to  recover  money  due  him, 
which  B  refuses  to  pay.  Before  or  during  the  progress  of  the  suit,  A 
learns  that  0  is  indebted  to  B.  A  then  has  a  garnishment  summons 
issued  for  0  which  orders  him  not  to  turn  over  any  money  which  he 
may  have  belonging  to  B,  and  also  orders  him  to  appear  in  court  and 
answer  questions  concerning  his  indebtedness.  If  on  examination  it 
is  discovered  that  he  is  indebted  to  B,  and  the  debt  is  one  which  by  law 
is  subject  to  garnishment,  the  money  is  either  ordered  to  be  paid  into 
court  or  he  is  ordered  to  keep  it  subject  to  order  from  the  court.  Then 
if  in  the  suit  judgment  is  rendered  against  B,  the  money,  or  a  portion 
of  it,  is  given  to  A. 

Suinmons. — If  one  person  wishes  to  sue  another,  the  first  thing 
necessary  is  that  the  person  sued  be  notified  of  the  fact  that  he  has 
been  sued,  and  this  notification  is  given  by  what  is  called  a  summons. 
The  clerk  of  the  court  in  which  the  suit  is  brought,  if  it  has  a  clerk, 
and  if  not  then  the  judge,  writes  out  a  notice  to  the  defendant  saying 
that  he  has  been  sued,  states  the  cause  of  action,  the  amount  claimed, 
and  the  time  he  has  in  which  to  state  his  defense.  This  summons  is 
served  on  the  defendant  by  the  sheriif,  constable,  or  marshal,  by  deliv- 
ering a  copy  of  it  to  him  or  leaving  a  copy  of  it  at  his  residence  if  he 
is  not  at  home. 

Pleadings. — Before  a  court  can  decide  a  case  it  must  be  brought 
before  it  in  such  a  manner  that  some  fact  or  facts  are  alleged  by  the 
plaintiff  and  denied  by  the  defendant.  This  condition  of  affairs  is 
brought  about  by  what  are  called  the  pleadings,  which  are  simply  the 
statements  made  by  the  parties  of  their  respective  sides  of  the  case. 
Under  the  common  law  there  were  a  large  number  of  parts  to  the  plead- 
ings, and  they  were  required  to  be  very  technical,  but  most  of  the  states 
have  adopted  rules  of  pleading  which  very  much  simplify  them.  Under 
the  law  of  most  states  the  pleadings  consist  of  the  plaintiff's  petition  or 


PLEADING   AND    PRACTICE.  2'19 

declaration,  the  defendant's  plea  or  answer,  the  plaintiff's  replication, 
and  a  demurrer  which  may  be  filed  by  either  party. 

Petition. — The  petition,  or  declaration  as  it  is  called  in  some  states, 
consists  simply  of  a  plain  and  concise  statement  of  the  cause  of  action 
which  the  plaintiff  has  against  the  defendant.  If  the  action  is  for 
damages  for  a  breach  of  contract,  it  is  necessary  for  the  plaintiff  to  set 
forth,  (1)  the  contract  on  which  the  action  is  based;  (2)  the  fact  that 
the  contract  has  been  broken  and  injury  sustained;  and  (3)  the  amount 
of  damages  claimed.  Different  causes  of  action  of  course  require  dif- 
ferent forms  of  statement,  and  in  all  forms  there  is  more  or  less  of 
technicality  which  must  be  followed,  such  as  setting  forth  the  names  of 
the  parties,  the  name  of  the  court  in  which  the  action  is  brought,  etc. 
Although  the  pleadings  are  properly  treated  together  in  a  discussion  of 
them,  as  a  matter  of  fact,  the  petition  is  generally  filed  before  the  sum- 
mons, spoken  of  above,  is  issued,  the  summons  being  made  out  from 
the  facts  stated  in  the  petition.  If  the  suit  is  before  a  justice  of  the 
peace,  this  first  pleading  is  called  a  bill  of  particulars,  and  need  not 
then  be  as  technical  as  if  in  a  higber  court. 

Answer. — The  answer  of  the  defendant,  or  plea  as  it  is  sometimes 
called,  is  simply  a  statement  of  the  defendant's  defense  against  the 
action  of  the  plaintifi".  In  a  former  chaj^ter  we  have  stated  and  de- 
scribed the  principal  defenses  that  may  be  set  up  in  an  action,  and  the 
statement  of  this  defense  constitutes  the  defendant's  answer.  The 
summons  which  notifies  him  that  he  has  been  sued  states  the  time  he 
has  in  which  to  file  his  answer,  and  if  it  is  not  filed  in  the  required 
time  it  is  not  good,  and  judgment  is  rendered  against  him.  The  answer 
may  either  deny  the  facts  set  forth  in  the  plaintiff's  petition  or  admit 
them,  and  set  up  other  facts  by  way  of  excuse. 

Replication. — If  the  defendant's  answer  denies  the  facts  alleged  by 
the  plaintiff,  the  issues  are  said  to  be  made  up.  Certain  facts  are  set 
forth  as  true  by  the  plaintiff  and  denied  by  the  defendant,  and  the  trial 
is  simply  to  determine  the  truth  or  falsity  of  these  facts.  If,  however, 
the  defendant  instead  of  denying  the  facts  alleged  by  the  plaintiff 
admits  their  truth  and  sets  up  new  facts  as  a  justification,  the  plaintiff 
must  make  answer  to  these  new  facts  which  he  does  in  what  is  called 
the  replication,  or  simply  the  reply.  This  again  may  be  simply  a  denial, 
or  new  facts  in  justification. 

Demurrer. — It  may  happen  at  sometime  during  the  course  of  the 
pleadings  that  one  party  may  think  that  the  facts  set  up  by  the  other, 
even  if  true,  do  not,  in  law,  constitute  a  justification,  and  consequently 
it  is  unnecessary  for  him  either  to  deny  or  justify  with  new  facts. 
Under  these  circumstances  he  demurs  to  the  j)leading  of  the  other ; 


220  PLEADING    AND    PRACTICE. 

that  is,  he  says  for  answer,  that  the  pleading  of  the  other  is  not  suffi- 
cient in  law.  In  case  of  a  demurrer,  only  the  law  is  decided  by  the 
judge,  and  if  the  pleadings  are  insufficient  they  are  corrected  before 
anything  further  can  be  done.  If  they  are  decided  to  be  sufficient,  the 
party  who  has  demurred  must  then  answer  to  the  facts  and  the  trial 
proceeds. 

Change  of  Venue. — Sometimes  it  is  believed  that  a  fair  and  impar- 
tial trial  cannot  be  had  before  the  court  in  which  the  action  is  brought. 
When  this  is  the  case,  application  is  made  for  what  is  called  a  change 
of  venue,  that  is,  a  change  in  the  place  of  trial.  Such  a  change  will 
be  granted  whenever  circumstances  are  such  that  a  perfectly  impartial 
trial  is  impossible  in  the  place  where  the  action  is  brought.  Instances  - 
of  such  cases  are,  where  from  the  public  interest  taken  in  tlie  trial,  an 
unprejudiced  jury  cannot  be  secured  within  the  jurisdiction  of  the  court, 
or  the  judge  before  whom  it  is  to  be  tried  is  prejudiced. 

Continuance. — To  get  a  complicated  case  ready  for  trial  involves  a 
vast  amount  of  work,  consequently  it  frequently  occurs  that  wben  the 
proper  time  comes,  and  the  case  is  called  for  trial,  one  of  the  parties  is 
not  ready.  Application  is  then  made  for  a  continuance,  that  is,  that 
the  case  be  continued  on  the  docket  until  the  next  term  of  court,  or 
in  justices'  courts  that  do  not  go  by  terms,  for  a  certain  number  of 
days.  If  it  can  be  shov^n  to  the  satisfaction  of  the  judge  that  the  party 
making  the  application,  by  the  exercise  of  diligence  has  been  unable  to 
get  ready  for  trial,  a  continuance  will  be  granted. 

Witnesses. — The  facts  alleged  in  the  pleadings  can,  of  course,  only 
be  proved  by  the  testimony  of  witnesses,  persons  who  know  something 
about  them.  In  order  to  get  the  witnesses  into  court  a  subpoena  is 
issued  for  each  one.  This  is  simply  an  order  from  the  court  to  them 
to  appear  in  court  at  a  certain  time  and  place  to  testify  to  what  they 
know  about  a  certain  case.  A  failure  to  so  appear  without  a  legal 
excuse  constitutes  a  contempt  of  court,  for  which  the  party  is  liable  to 
a  fine.  So  also,  a  refusal  to  testify  when  once  in  court  constitutes  a 
contempt  of  court. 

Depositions. — In  a  civil  case  a  witness  cannot  generally  be  compelled 
to  leave  his  own  county,  and  if  his  testimony  is  necessary  outside  the 
county  it  must  be  secured  in  some  other  way.  This  is  done  by  what  is 
called  taking  his  deposition.  The  party  who  desires  his  testimony  gives 
notice  to  the  other  party  of  the  time  and  place  of  taking  the  deposition, 
and  written  questions  are  prepared  in  such  a  way  as  to  bring  out  the 
witness's  knowledge  of  the  subject  and  sent  to  an  officer  to  be  asked 
the  person,  or  the  parties  go  in  person  and  ask  the  questions.  This  is 
done  in  the  presence  of  a  proper  officer,  usually  a  notary  public  or  jus- 


PLEADIISTG   AND   PRACTICB.  221 

tice  of  the  peace,  the  questions  and  answers  are  sealed  up  and  sent  to 
the  clerk  of  the  court  where  the  testimony  is  to  be  used.  This  is  read 
at  the  proper  time  in  the  trial  as  the  testimony  of  the  witness. 

Jury. — Generally  in  important  cases  where  there  is  a  dispute  with 
regard  to  facts,  the  parties  are  allowed  a  trial  by  jury.  A  jury  consists 
usually  of  twelve  men,  unless  the  trial  is  before  a  justice  of  the  peace, 
when  it  is  six.  In  selecting  a  jury  the  required  number  of  men  are 
called  and  the  parties  are  allowed  to  question  them  to  see  if  they  know 
anything  about  the  case,  or  if  there  are  any  other  circumstances  which 
would  be  likely  to  hinder  them  from  rendering  an  impartial  verdict. 
If  one  is  found  in  any  way  disqualified  he  is  dismissed  and  another 
summoned  in  his  place.  This  process  is  kept  up  until  a  jury  is  found 
to  no  one  of  which  objection  can  be  raised,  and  then  the  trial  proceeds. 

Trial.— The  object  of  the  trial  is  simply  to  get  the  evidence  before 
the  jury  to  enable  them  to  decide  as  to  the  truth  of  the  facts,  and  of 
course  it  is  the  aim  of  each  party  to  get  the  testimony  before  the  jury 
in  such  a  way  as  to  prove  as  much  as  possible  for  his  side  of  the  case. 
The  plaintiff  having  to  make  out  his  case,  that  is,  introduce  such  evi- 
dence as  in  the  absence  of  anything  contradictory  will  entitle  him  to  a 
judgment,  he  introduces  his  witnesses  before  the  defendant  is  obliged 
to  do  anything.  His  side  of  the  case  having  been  completed,  the  defend- 
ant introduces  his  testimony.  After  the  defendant  has  finished,  the 
plaintiff  is  allowed  to  bring  in  new  witnesses,  or  old  ones  again,  for  the 
purpose  of  contradicting  the  evidence  brought  out  by  the  defendant. 
The  evidence  on  both  sides  having  been  all  introduced,  the  case  is  left 
with  the  jury  to  decide. 

Verdict. — Although  the  trial  is  complete,  and  all  that  is  necessary  is 
for  the  jury  to  decide,  to  render  a  verdict  as  it  is  called,  two  further 
steps  are  usually  taken  to  assist  the  jury  in  their  decision, — the  argu- 
ments of  the  counsel,  and  the  judge's  charge.  The  lawyers  take  up 
the  evidence  and  endeavor  to  explain  it  to  the  jury  in  such  a  way 
as  to  secure  a  verdict  for  their  side  of  the  case.  The  province  of 
the  jury  is  simply  to  decide  facts;  but,  in  connection  with  disputed 
facts,  there  is  always  more  or  less  dispute  about  the  law  govern- 
ing them,  and  in  order  to  take  the  decision  of  these  points  of  law 
out  of  the  hands  of  the  jury,  the  judge  decides  for  them,  some- 
times in  writing,  sometimes  oraly,  the  legal  questions  involved;  this 
is  called  charging  the  jury.  The  jury  are  then  taken  to  a  room  by 
themselves  where  they  deliberate  on  the  evidence  and  endeavor  to  come 
to  some  agreement  as  to  how  the  case  should  be  decided.  Whenever 
all  have  agreed  upon  the  same  verdict  they  return  into  court  with  it, 
hand  it  to  the  clerk,  who  reads  it,  and  are  then  dismissed.     Should 


222  PLEADING    AITD    PRACTICE. 

they  fail  to  unanimously  agree  on  a  decision  they  are  kept  together  as 
long  as  there  is  any  likelihood  that  they  may  finally  agree,  and  when  it 
becomes  evident  that  there  is  no  such  likelihood  they  are  dismissed 
and  the  case  must  be  tried  over  again  before  a  new  jury.  After  a 
verdict  has  been  rendered  two  steps  ordinarily  remain,  judgment  and 
execution. 

Judgment. — The  province  of  the  jury,  as  we  have  already  seen,  is 
simply  to  find  what  facts  are  true.  If  it  is  a  civil  suit,  in  which  damages 
are  asked,  the  jury  finds  that  a  certain  amount  of  damages  ought  to  be 
awarded;  if  it  is  a  criminal  prosecution,  they  find  that  the  defendant  is 
guilty  of  a  certain  crime.  It  remains  now  for  the  judge  to  say  that  the 
defendant  shall  pay  the  plaintiff  a  certain  sum  as  damages,  or  that  a 
certain  punishment  shall  be  inflicted  on  the  defendant.  This  is  the 
judgment  of  the  court.  In  a  civil  action,  the  party  against  whom  judg- 
ment is  rendered  is  also  ordered  to  pay  costs. 

Execution  is  the  carrying  into  efiect  of  the  judgment  of  the  court. 
Where  the  judgment  is  that  the  defendant  shall  pay  damages  to  the 
plaintiff,  the  execution  will  compel  him  to  do  this  if  he  has  any  prop- 
erty which  is  not  exempt  from  forced  sale  under  execution.  In  most 
of  the  states  every  one  has  allowed  him  certain  property  which  cannot 
be  sold  in  satisfaction  of  an  ordinary  judgment,  and  this  is  said  to  be 
exempt  from  execution.  If  the  defendant  has  property  which  is  not 
thus  exempt,  and  refuses  to  satisfy,  that  is,  pay  the  judgment,  the 
sheriff  cr  constable  proceeds  to  levy  upon,  advertise  and  sell  it,  or  so 
much  as  may  be  necessary  to  pay  the  amount  of  the  judgment.  It 
sometimes  happens,  however,  that  the  defendant  desires  to  pay  the 
judgment  but  has  not  the  money  just  ready.  In  that  case,  by  giving 
bond  that  the  judgment  will  be  satisfied,  that  is,  getting  some  respon- 
sible person  to  agree  to  pr^y  it  if  he  does  not,  he  can  have  what  is  called 
a  stay  of  execution.  He  will  be  given  a  certain  amount  of  time,  say 
thirty  or  ninety  days,  in  which  to  make  payment,  and  execution  will 
not  be  issued  until  the  time  has  passed. 

New  Trial. — It  frequently  happens  that  the  judge,  in  the  course  of 
the  trial,  makes  some  ruling  on  a  point  of  law  which  one  of  the  parties 
considers  erroneous.  When  this  is  true,  after  the  trial  is  finished  and 
the  judgment  rendered,  if  it  is  against  the  party  who  considers  the  error 
to  have  been  made,  application  is  made  for  a  new  trial.  Or  it  may  be 
that  the  party  against  whom  the  judgment  has  been  rendered  has,  since 
the  trial,  discovered  some  new  evidence,  in  which  case,  also,  such  appli- 
cation is  made.  If  the  judge  can  be  convinced  that  he  has  made  an 
error  in  any  of  his  rulings,  or  that  some  new  and  material  evidence  has 
been  discovered  since  the  trial,  which,  by  the  exercise  of  diligence  could 


PLEADING   AND    PRACTICE.  223 

not  have  been  discovered  before,  a  new  trial  is  granted,  and  the  case  is 
tried  again  before  the  same  court  and  a  new  jury.  If  the  judge  refuses 
to  grant  a  new  trial,  the  only  further  chance  the  party  has  is  to  take  an 
appeal. 

Appeal. — By  appeal  is  meant  talcing  the  case  to  a  higher  court,  but 
appeal  is  not  the  proper  technical  term  to  apply  to  the  ordinary  removal 
of  a  case  to  a  higher  court.  In  an  actual  appeal- the  whole  case,  both 
law  and  fact,  is  examined,  whereas  ordinarily  only  the  law  is  re-exam- 
ined. Eemoval  by  what  is  called  a  writ  of  error,  is  the  method  em- 
ployed where  the  case  has  been  tried  by  a  jury.  When  the  judge  in 
the  court  below  refuses  to  grant  a  new  trial,  the  party  applying  for  it 
makes  a  statement  which  sets  forth  the  errors  he  believes  the  judge  to 
have  made  in  deciding  points  of  law,  and  asks  the  higher  court  to  de- 
cide these  same  points.  This  is  done,  and  if  the  higher  court  agrees 
with  the  lower,  the  decision  is  said  to  be  affirmed;  if  it  does  not  agree, 
the  decision  is  reversed  and  the  case  sent  back  to  be  tried  over  ao-ain; 
that  is,  the  higher  court  says  the  lower  court  ought  to  have  granted  a 
new  trial  and  orders  it  to  do  so.  Of  course,  during  all  this  time  there  is 
a  stay  of  execution,  and  the  judgment  will  remain  unsatisfied  until  the 
case  is  finally  decided,  either  by  the  parties  failing  to  take  an  appeal,  or 
the  higher  court  affirming  the  decision  of  the  lower  court. 

QUESTIONS, 

Define  action;  what  kinds  are  there?  define  each.  What  are  the 
parties  called?  Who  may  be  a  party?  What  is  a  garnishee?  What  is  a 
summons?  Of  what  do  the  pleadings  consist?  Define  each  part.  What 
is  change  of  venue?  when  granted?  What  is  a  continuance?  when 
granted?  What  are  witnesses?  depositions?  What  is  a  jury?  How  is 
the  trial  conducted?  What  is  a  verdict?  judgment?  execution?  When 
will  a  new  trial  be  granted?     What  is  a  writ  of  error? 


GLOSSARY. 


AI)an(loinueiit.    lu  marine  insurance,  the  giving  up  of  property  partly  destroyed, 

by  llie  owner  to  the  insurer. 
Abolish.     To  make  void;  to  cancel. 
Abrogate.     To  repeal;  to  annul;  to  abolish  entirely. 
Acceptance.    In  mercantile  law.     (1)  The  act  by  which  the  person  upon  whom  a 

bill  of  exchange  or  other  order  is  drawn,  engages  to  pay  it.     (2)  The  bill  after 

it  has  been  accepted. 
Acceptor.     One  who  accepts  an  order,  a  draft,  or  bill  of  exchange. 
Accommodation  Paper.    Commercial  paper  for  which  no  consideration  passed 

between  the  original  parties. 
Accord.     Agreement. 
Acknowledgment.    The  act  by  which  a  party  who  has  executed  an  instrument 

declares  or  acknowledges  it  before  a  competent  officer  to  be  his  or  her  act  or  deed. 
Action.  The  formal  means  of  recovering  one's  right  in  a  court  of  justice — a  suit. 
Act  of  Grod.     Any  accident  produced  by  a  physical  cause  which  is  irresistible, 

such  as  lightning,  tempest,  etc. 
Administrator.     One  who  is  appointed  to  take  charge  of  the  property  or  estate  of 

a  person  dying  without  having  made  a  will  and  is  accountable  for  the  same. 
Affreightment.    The  hiring  of  a  ship  for  the  conveyance  of  goods. 
Affinity.     The  connection  which  arises  by  marriage  between  each  of  the  married 

persons  and  the  kindred  of  the  other. 
Agency.     The  relation  existing  between  two  parties,  by  which  one  is  authorized  to 

do  certain  acts  for  the  other,  with  other  parties. 
Agent.     Any  person  who  is  employed  by  another  to  do  any  act  for  the  employer's 

benefit  or  account. 
Age  of  Consent.    The  age  at  which  infants  are  capable  of  making  a  valid  contract 

of  marriage. 
Alien  Enemy.    An  alien  who  is  the  subject  of  a  ho.stile  power. 
Alimony.     An  allowance  made  to  a  wife  out  of  her  husband's  estate  during  a  suit 

for  divorce  or  separation,  or  at  its  termination,  for  her  life  or  for  a  shorter 

period. 
Amotion.     Removal  of  an  officer  of  a  corporation. 
Ante-dated.     Dated  at  a  time  earlier  than  the  actual  date. 
Annulment.    The  act  of  making  void. 
Appurtenances.     Things  belonging  to  another  thing. 
Arbitration.     The  investigation  and  determination  of  a  cause  or  matter  in  con 

troversy  by  an  unofficial  person  or  persons  mutually  chosen  by  the  contending 

parlies. 
Articles  of  Copartnership.    The  written  agreement  by  which  a  copartnership  is 

formed. 
Assault.     An  illegal  and  forcible  attempt  or  offer  to  do  a  bodily  harm  to  another. 
Assent.    Act  of  agreeing  to  anything;  consent. 
Assets.    Property  available  for  the  payment  of  debts. 
Assignee.    The  person  to  whom  the  failing  debtor  transfers  all  his  remaining 

property  for  the  purpose  of  having  it  distributed  among  his  creditors.     One 

to  whom  anything  is  assigned. 

224 


GLOSSARY.  225 

Assiarninent.     A  transfer  by  a  failing  debtor  of  his  property  to  an  assignee.     A 

transfer  by  one  person  to  another  of  any  property,  personal  or  real. 
Assignor.     One  who  assigns  property. 
Assurance  and  Assured.     Same  as  Insurance  and  Insured. 
Award.     The  decision  of  arbitrators. 

Bailment.  A  delivery  of  goods  in  trust  upon  a  contract,  express  or  implied,  that 
the  trust  shall  be  faithfully  executed  on  the  part  of  the  bailee.  The  bailor  is 
he  who  delivers;  the  bailee,  he  to  whom  delivery  is  made. 

Banlc  Bill.  A  written  promise  to  pay  to  the  bearer  on  demand  a  certain  sum  of 
money,  issued  by  a  bank  and  used  as  money. 

Bank  Note.  Same  as  Bank  Bill.  Also,  a  common  promissory  note  made  payable 
at  a  bank. 

Bankruptcy.  The  condition  of  one  who  has  been  declared  by  a  court  of  bank- 
ruptcy to  be  a  bankrupt. 

Barratry.  Any  breach  of  duty  committed  by  the  master  of  a  vessel  or  the  seamen, 
without  the  consent  of  the  owner,  by  reason  of  which  the  ship  or  cargo  is 
injured. 

Barter.  To  trade  by  exchange  of  goods,  in  distinction  from  trading  by  the  use  of 
money. 

Beneficiary.  (1)  In  life  insurance,  the  person  to  whom  a  policy  is  made  payable. 
(2)  The  person  for  whose  benefit  another  holds  the  legal  title  to  real  estate. 

Beyond  Seas.  Denotes  absence  from  the  country,  and  generally  held  to  mean 
absence  from  the  particular  state. 

Bill  of  Exchange.  A  direction  in  writing,  by  the  person  who  signs  it,  ordering 
the  one  to  whom  it  is  addressed  to  pay  a  third  person  a  definite  sum  of  money 
at  a  specified  time. 

Bill  of  Lading.  A  document  delivered  by  a  carrier  to  one  sending  goods  by  him, 
acknowledging  that  they  have  been  received  by  him  for  transportation  to  a 
certain  place.     It  is  both  a  receipt  and  a  contract. 

Blank  Indorsement.  One  in  which  no  particular  person  is  named  as  the  one  to 
whom  payment  is  to  be  made.     It  consists  of  the  indorser's  name  alone. 

Bond.  A  written  and  sealed  instrument  by  which  one  atrrees  to  pay  to  another  a 
certain  amount  of  money,  unless  something  else  specified  therein  is  done. 

Bottomry  Bond.    An  obligation  given  for  a  loan  upon  a  vessel  and  accruing 

freight. 

Breach.    In  the  law  of  contracts,  the  violation  of  an  agreement  or  obligation. 

By-Bidder.  A  person  employed  to  bid  at  auctions  in  order  to  raise  the  price  of 
articles  to  be  sold,  and  with  an  understanding  that  his  bids  are  not  to  be  bind- 
ing on  himself. 

By-Laws.  The  private  laws  or  regulations  made  by  a  corporation  for  its  own 
government. 

Capital  Stock.  The  fund  or  property,  as  a  whole,  contributed  or  supposed  to 
have  been  contributed  to  a  corporation  at  its  organization,  as  its  property. 

Caveat  Emptor.  Latin  plirase,  meaning  "let  the  purchaser  beware,"  and  applies 
to  a  case  in  which  the  thing  sold  is  before^  the  buyer  and  he  examines  it. 

Certificjlte  of  Deposit.  A  certificate  issued  by  a  bank  or  banker,  showing  that  a 
certain  sum  of  money  has  been  deposited  there,  payable  to  a  certain  person,  or 
to  his  order,  or  to  the  bearer. 

Certificate  of  Stock.  A  certificate  given  by  the  proper  oflBcers  of  a  corporation, 
showing  that  a  certain  person  owns  a  certain  number  of  shares  of  the  capital 
stock. 

Certification  (of  check).  The  signature  of  the  proper  oflScer  of  the  bank  written 
across  its  face,  sometimes  with  and  sometimes  without  the  word  "certified," 
or  "  good."  It  is  a  recognition  of  the  check  by  the  bank  as  good  and  the  bank 
is  bound  to  pay  it. 


226  GLOSSARY. 

Charter.  (1)  A  special  act  of  legislature  creating  a  particular  corporation.  (2)  To 
hire  or  let  a  vessel  or  part  of  it. 

Chartered  Ship.    One  let  wbolly  or  in  part. 

Charter  Party.  The  written  instrument  by  which  the  owner  of  a  vessel  lets  it, 
or  a  part  of  it,  to  another. 

Chattel  Mortgage,  A  conditional  sale  of  personal  property,  one  which  is  to 
become  void  if  a  certain  tliiug  happens.  Chiefly  used  as  a  security  for  the 
payment  of  money. 

Chattels.  Commonly  means  goods  of  any  kind,  or  every  species  of  personal 
property. 

Check.  A  written  order  for  money  drawn  upon  a  bank  or  banker,  and  payable 
Immediately, 

Chose  in  Action.    A  thing  of  which  one  has  not  the  possession,  but  only  a  right 

to  demand  by  action  at  law. 
Chose  in  Possession.    Personal  property  of  which  one  has  the  actual  possession. 
Civil  Law.     The  system  of  law  of  ancient  Rome.     Also  used  in  distinction  from 

criminal  law. 
Civil  Remedy.    The  method  of  redressing,  by  means  of  a  suit  for  damages  or  for 

specific  performance,  an  injury  inflicted  by  one  person  upon  another. 
Collateral.    Property  pledged  as  security  for  the  performance  of  a  contract. 
Common  Carrier.     One  who,  as  a  business,  undertakes  for  hire  to  transport  from 

place  to  [)lace,  passengers  or  goods  of  all  who  choose  to  employ  him. 
Conimon  Law.    The  old  law  of  England  that  derives  its  force  from  long  usage 

and  custom. 
Competency.    The  legal  fitness  of  a  witness  to  give  evidence  on  the  trial  of  an 

action.  * 

Composition  Deed.    An  agreement  between  an  insolvent  debtor  and  his  creditors 

by  which,  upon  payment  to  each  of  some  fixed  proportion  of  his  claim,  they 

all  agree  to  release  the  debtor  from  the  balance  of  their  claims. 
Compromise.    An  agreement  between  a  debtor  and  his  creditors,  by  which  they 

agree  to  accept  a  certain  proportion  of  the  amounts  claimed  and  discharge  him 

from  the  remainder. 
Concurrent.    Existing  together. 
Condition  Precedent.    An  act  which  must  be  performed  by  one  person  before 

another  is  liable,  or  in  order  to  make  him  liable. 
Consanguinity.    Relation  by  blood. 
Consideration.    Tlie  reason  or  inducement  in  a  contract  upon  which  the  parties 

consent  to  be  bound. 
Consignee.    One  to  whom  merchandise,  given  to  a  carrier  by  another  person  for 

transportation  is  directed. 
Consignor.    One  who  gives  merchandise  to  a  carrier  for  transportation  to  another. 

Conveyance.  (1)  The  act  of  carrying  by  land  or  water.  (2)  The  means  of  convey- 
ance. (3)  A  written  instrument  by  which  an  estate  in  lands  is  transferred 
from  one  to  another. 

Copartnership.    Same  as  partnershfp. 

Corporation.  An  artificial  being  or  person  endowed  by  law  with  the  capacity  of 
perpetual  succession,  and  of  acting  in  certain  respects  like  a  n;itural  person. 
When  it  consists  of  one  individual  it  is  termed  a  corporation  sole,  and  when 
composed  of  a  collection  of  several  individuals  it  is  called  a  corporation 
aggregate. 

Counter-claim.    Same  as  Set-off. 

Course  of  Excliange.    The  current  price  of  bills  of  exchange  between  two  places. 

Covenant.    Any  promise  contained  in  a  sealed  instrument. 

Coverture.    The  legal  state  and  condition  of  a  married  woman. 


GLOSSARY.  227 

Criminal  Remedy.  The  method  of  punishing  a  wrong-doer  for  some  wrong 
committed  by  him  against  society. 

Curtesy.  The  estate  a  man  has  in  the  lands  of  his  wife  upon  her  death,  in  case  a 
living  child  has  been  born  to  them  during  their  marriage. 

Damages.  Compensation  in  money  to  be  paid  by  one  person  to  another  for  an 
injury  inflicted  by  the  former  upon  the  latter. 

Day.    Twenty-four  hours.     An  entire  day. 

Days  of  Grace.    Days  (usually  three)  allowed  by  custom  for  the  payment  of  bills 

and  notes  beyond  the  day  expressed  for  payment  on  the  face  of  them. 
Default.     Omission;  neglect  or  failure. 

Defense.    A  legal  excuse  made  by  the  defendant  to  the  plaintiff's  action,  showing 

why  he  ought  not  to  be  responsible  to  the  plaintiff  in  damages  for  an  injury. 
Demand.    Presentment  for  payment. 

Demurrage.  The  allowance  to  be  made  by  the  shipper  to  the  vessel  owner  as 
damages  for  detention  of  the  vessel  beyond  the  time  specified  in  the  charter 
party. 

Deposit.  A  bailment  or  delivery  of  goods  to  be  kept  and  returned  without  recom- 
pense. 

Deviation.    In  the  law  of  marine  insurance,  a  voluntary  departure  without  neces- 
sity from  the  regular  course  of  the  specific  voyage  insured. 
Disability.    Want  of  qualification;  incapacity  to  do  a  legal  act. 
Disaffirmance.    The  annulling  or  cancelling  of  a  voidable  contract. 

Discount.  (1)  The  taking  of  interest  in  advance.  (2)  A  deduction  from  a  price 
asked,  or  from  an  account,  debt,  or  demand. 

Disfranchisement.    Expulsion  of  a  member  from  a  corporation. 

Dishonor.    The  non-payment  of  negotiable  paper  when  it  is  due. 

Distress.  The  taking  of  personal  property  to  enforce  the  payment  of  something 
due,  as  rent. 

Divorce.    The  separation  of  husband  and  wife  by  the  sentence  of  the  law. 
Domestic  Relations.    The  relations  of  the  members  of  a  household  or  family 
Dower.    The  riglit  of  a  widow  to  the  use  or  ownership  of  some  portion  of  the  real 
estate  owned  by  her  husband. 

Draft.    Same  as  bill  of  exchange. 

Drawee.  The  person  upon  whom  a  bill  of  exchange  is  drawn,  who  is  directed  to 
make  the  payment. 

Drawer.    The  person  who  draws  or  makes  a  bill  of  exchange. 

Duress.    Personal  restraint  or  compulsion. 

Easement.    The  right  to  use  another's  land. 

Effects.    All  kinds  of  personal  property. 

Emblements.    Growing  crops  of  any  kind  produced  by  expense  and  labor. 

Eminent  Domain.    The  right  of  the  sovereign  power  to  take  private  property  for 

public  purposes. 
Enfict.    To  make  a  law  or  establish  by  law. 

Equity  of  Redemption.  The  right  which  a  mortgagor  has  to  redeem  his  estate 
after  the  mortgage  has  become  due. 

Escheat.  The  reverting  of  land  to  the  state  upon  the  death  of  the  owner  without 
lawful  heirs. 

Escrow.  A  deed  or  bond  delivered  to  a  third  party  to  be  held  and  delivered  to  the 
grantee  or  creditor  upon  the  performance  of  some  condition. 

Estate.    An  interest  in  property. 

Executed  (of  a  contract).    Finished. 

Execution.  (1)  A  written  command  issued  to  a  sheriff  or  constable,  after  a  judg- 
ment, directing  him  to  enforce  it.  (3)  The  act  of  signing  aud  sealing  a  legal 
instrument,  or  giving  it  the  form  required  to  make  it  a  valid  act. 


228  GLOSSAET. 

Executory  (of  a  contract).     Unfinished. 

Fee  Simple.    Full  ownership  in  lands. 

Feud.    An  estate  in  laud,  held  of  a  superior  by  service;  a  fief. 

Feudal  System.    The  system  of  feuds  or  fiefs. 

Firm.     All  the  members  of  a  partnership  taken  collectively. 

Foreclosure.    The  process  of  cutting  off  the  right  or  interest  of  the  mortgaged 

and  his  assignees  in  mortgaged  premises. 
Forfeiture.    A  loss  of  property,  right,  or  office,  as  a  punishment  for  some  illegal 

act  or  negligence.     Sometimes  used  for  the  thiug  forfeited. 
Forgery.    The  fraudulent  making  or  altering  of  a  written  instrument. 
Franchise.    A  privilege,  or  right,  conferred  by  grant  from  government  upon 

individuals. 
Fraud.    Any  cunning,  deception,  or  artifice  used  to  circumvent,  cheat,  or  deceive 

another. 
Freight.    The  compensation  to  be  paid  a  carrier  for  the  transportation  of  goods, 

or  the  goods  themselves  while  being  transported. 
General  Average.    A  contribution  made  by  the  owners  of  a  vessel  and  cargo 
toward  the  loss  sustained  by  one  of  their  number,  whose  property  has  been 
sacrificed  for  tlie  general  safety. 
General  Ship.    A  vessel  navigated  by  its  owner,  receiving  and  carrying  freight 

indifferently  for  all  who  apply. 
Goods.     Same  as  chattels  and  effects. 

Good  Will.    Benefit  arising  from  the  fact  that  persons  used  to  trading  or  doing 
business  at  a  particular  place  will  continue  to  do  so;  it  is  a  property  subject  to 
transfer. 
Guaranty.    A  contract  whereby  one  person  engages  to  be  answerable  for  the  debt 

or  default  of  another  person.     Ouarantor  is  he  who  makes  the  guaranty. 
Guardian.    One  who  is  entitled  to  the  custody  of  the  person  or  property  of  an 
infant,  or  one  who  is  not  able  to  take  care  of  himself,  as  an  idiot  or  insane 
person. 
Guest.    A  person  received  and  entertained  at  an  inn  or  hoteL 
Idiot.    One  who  never  had  reasoning  power. 
Inchoate.    Incipient;  incomplete. 
Incompetency.    Lack  of  necessary  legal  qualifications. 
Incorporate.    To  form  into  a  corporation. 
Indemnity.    Compensation  for  damage  suffered,  or  that  which  is  given  or  promised 

to  a  person  to  prevent  his  suffering  damage. 
Indorsement  (of  negotiable  paper).     (1)  A  name,  with  or  without  other  words, 
written  on  tlie  back  of  the  paper.     (3)  The  agreement  implied  in  one  s  writmg 
his  name  on  the  back  of  negotiable  paper,  to  pay  it  if  the  principal  debtor  does 
not.     The  one  who  makes  tlie  indorsement  is  called  the  mdorser.     The  person 
in  whose  favor  the  indorsement  is  made  is  called  the  indorsee. 
Infant.    In  law,  is  one  under  the  age  of  twenty  one  years. 
Injunction.    An  order  or  direction  of  the  court  compelling  a  certain  person  to 

refrain  from  doing  some  particular  act  or  thing. 
Insolvency.    State  of  being  unable  to  pay  one's  debts. 

Insurable  Interest.    Such  an  interest  in  the  thing  insured  that  the  person  pos- 
sessing it  may  be  injured  by  the  risk  to  which  the  thing  insured  is  exposed. 
Insurance.    A  contract  of  indemnity  against  loss  from  certain  causes.    The 

insurer  is  the  party  agreeing  to  make  the  insurance. 
Invalid.    Of  no  legal  force. 

InTentory.  (1)  An  account  or  catalogue  of  goods  or  movables  (2)  In  law  a  list 
or  schedule  in  writing  of  the  goods,  chattels,  and  credits  (and  sometimes  of  the 
real  estate)  of  a  testator  or  intestate,  made  by  an  esecutar  or  administrator. 


GLOSSARY.  229 

Joint-Stock  Company.  A  species  of  partnership  possessing  some  of  the  charac- 
teristics of  corporations. 

Judgment.  The  sentence  of  the  law  pronounced  by  the  court  upon  any  matter 
contained  in  the  record,  or  in  any  case  tried  by  tlie  court. 

Judgement  Debtor.    Party  against  -wliom  a  judgment  is  obtained. 

Landlord.    (1)  One  who  owns  and  rents  or  leases  lands  or  houses.     (2)  The  keeper 

of  an  inn. 

Law  Merchant.    The  general  body  of  usages  in  matters  relative  to  commerce. 

Lease.  A  contract  by  which  one  grants  to  another  for  a  period  the  use  of  certain 
real  estate. 

Legal  Tender.  That  kind  of  money  which  by  law  can  be  offered  in  payment  of 
a  debt. 

Letter  of  Credit.  A  written  direction  by  some  well-known  banker  authorizing 
the  party  to  whom  it  is  addressed  to  draw  upon  him  in  a  particular  mauucr  for 
any  amount  he  chooses  up  to  a  specified  limit. 

Libel.    To  defame  by  published  writing,  printing,  signs,  or  pictures. 

Lien.  A  right  whicli  one  person  has  to  retain  the  properly  of  another  by  way  of 
security  for  a  debt  or  claim. 

Liqtiidate.    To  pay;  to  settle  an  account. 

Litigation.    The  act  of  litigating;  judicial  contest;  a  suit  at  law. 

Lucid  I  ntervals.  Periods  from  time  to  time  in  cases  of  lunacy  in  which  the  person 
afflicted  becomes  sane. 

Lunatics.    Persons  who  have  lost  their  reason. 

Maintenance.     Support  by  means  of  food,  clothing,  and  other  conveniences. 

Mandate.  A  bailment  of  personal  property  in  wliich  the  bailee  undertakes  with- 
out compensation  to  do  something  for  the  bailor  with  the  thing  bailed.  The 
bailor  is  generally  termed  the  mandator,  and  the  bailee  the  mandatary. 

Maturity.    The  time  at  which  commercial  paper  legally  becomes  due. 

Merger.    The  absorption  or  extinguishment  of  one  contract  in  another. 

Minor.    Bame  as  Infant. 

Misdemeanor.  A  lower  kind  of  crime;  an  indictable  offense  not  amounting  to 
felony. 

Misuser.    The  abuse  of  a  privilege. 

Mouth.  Generally  in  this  country,  where  used  in  contracts,  means  a  calendar 
month. 

Mortgage.  A  grant  or  conveyance  of  an  estate  or  property  to  a  creditor,  for  the 
security  of  a  debt,  and  to  become  void  on  payment  of  such  debt.  The  mort- 
gagor is  the  one  who  gives  the  mortgage  upon  his  property;  the  mortgagee  the 
one  to  whom  the  mortgage  is  given. 

Municipal.  Of  or  belonging  to  a  city;  but  municipal  law  is  the  name  given  to  the 
system  of  law  of  any  one  nation  or  state. 

National  Currency.    National  Bank  bills. 

Negotiable  Taper.  An  instrument  as  a  bill  or  note,  which  may  be  transferred 
from  one  to  another  by  indorsement. 

Nominal  Damages.    Those  given  for  the  violation  of  a  right  from  which  no  actual 

loss  has  resulted. 

Nonuser.    A  failure  to  use  rights  and  privileges. 

Notary  Public.     An  officer  appointed  variously  under  the  laws  of  different  states, 

whose  acts  are  respected  by  the  law-merchant  and  the  law  of  nations,  and 

hence  have  force  out  of  their  own  stale  or  country. 

Open  Policy.    One  in  which  there  is  no  valuation  of  the  thing  insured. 

Oral  Contract.    A  contract  made  by  means  of  spoken  words. 

Ordinance.  A  rule,  or  order,  or  law.  Usually  applied  to  the  acts  or  laws  passed 
by  the  common  council  of  a  city. 


230  GLOSSARY. 

Outlinved.  A  debt  is  said  to  be  outlawed  when  it  has  existed  for  such  a  length  of 
lime  that  tlie  law  prevents  its  being  enforced. 

Parol  Contract.    Any  contract  not  under  seal. 

Partiiersliip.  Tlie  relationship  resulting  from  an  agreement  between  two  or  more 
persons  to  place  their  money  effects,  labor  and  skill,  or  some  or  all  of  them,  in 
some  enterprise  or  business,  and  divide  the  profits  and  bear  the  losses  in  certain 
proportions. 

Party-Wall.    A  wall  common  to  two  adjoining  estates. 

Pa>vn.  A  sale  of  personal  property  on  condition  that  it  may  be  redeemed  within 
a  certain  time. 

Payee.  The  person  to  whom  the  payment  of  any  kind  of  commercial  paper  is 
directed  to  be  made. 

Penalty.    Forfeiture,  or  sum  to  be  forfeited,  for  non-performance  of  an  agreement. 

Per  Centum  or  Per  Cent.    By  the  hundred. 

Perils  of  the  Sea.     All  the  dangers  naturally  incident  to  navigation. 

Perjury.  A  willfully  false  statement,  by  one  who  is  lawfully  required  to  tell  the 
trulli,  and  wlio  is  lawfully  sworn,  made  in  a  judicial  proceeding,  and  in  rela- 
tion to  a  matter  that  is  material  to  the  point  in  question. 

Piracy.  Any  forcible  robbery  on  the  high  seas,  done  without  lawful  authority, 
and  with  wrongful  purpose. 

Pledge.     A  bailment  of  personal  property  to  secure  the  payment  of  some  debt  or 

the  fulfillment  of  some  agreement.     The  bailor  is  called  the  pledgor,  and  the 

bailee  the  pledgee. 
Policy.    The  written  contract  of  insurance. 

Post-Dated.    Having  a  date  subsequent  to  that  at  which  it  is  actually  made. 
Power  of  Attorney.    A  written  instrument  under  seal  by  which  one  party  ap- 

jioints  another  to  act  for  him. 
Premixini.     The  consideration  or  price  paid  for  insurance. 
Prescription.    The  right  to  a  thing  derived  from  immemorial  usage. 
Presumption.     An  inference  of  the  law,  from  certain  facts,  of  the  existence  or 

truth  of  some  other  fact  or  proposition. 

Prima  Facie.  Literally,  at  the  first  appearance.  Prima  facie  evidence  is  that 
which  is  sufficient  to  establish  a  fact,  unless  it  be  rebutted  or  contradicted. 

Principal.    (1)  A  party  for  whom  another  is  authorized  to  do  certain  acts  with 

third  parties.     (2)  A  sum  of  money  at  interest. 
Promissory  Note.    A  written  promise,  signed  by  the  person  promising,  to  pay  a 

certain  sum  of  money  at  a  certain  time  to  a  person  named,  or  to  his  order,  or 

to  the  bearer. 
Prosecute.    To  proceed  against  by  legal  measures. 
Protest.    A  formal  declaration  in  writing  by  a  notary  public  of  the  demand  and 

relusal  to  pay  a  note  or  bill. 
Proxy.    (1)  One  who  represents  another.     (2)  A  writing  by  which  one  authorizes 

another  to  vote  in  his  place. 
Public  Enemies.     Those  who  belong  to  a  nation  at  war  with  another. 
Puffer.     Same  as  By-Didder. 
Quasi.    As  if;  as  though.     Quasi  corporations  are  bodies  like  corporations  and  yet 

are  not  strictly  corporations. 
Ratification.     Giving  force  to  a  contract  which  otherwise  is  not  binding. 
Real  Estate.     Same  as  real  property. 
Realty.    Same  as  real  property. 
Receipt.    A  written  acknowledgment  by  one  receiving  money  or  other  property 

that  it  has  been  received. 
Receiver.    Usually  means  a  person  appointed  by  a  court  to  take  and  hold  property 

in  dispute,  the  property  of  a  bankrupt  or  the  property  of  a  dissolved  corporation. 


GLOSSARY.  231 

Recoupment.    A  reduction  or  diminution  of  damages  on  account  of  a  breach  of 
warranty  or  defects  in  performance. 

Re-enact.     To  enact  anew. 

Registry.     Tlie  entering  or  recording  of  real  estate  conveyances  in  books  of  public 

record. 
Release.     An  instrument  in  the  general  form  of  a  deed  that  in  distinct  terms  remits 

the  claim  to  wbich  it  refers;   and  being  under  seal,  although  reciting  only  a 

nominal  consideration,  extinguishes  tiie  debt. 

Remedy.     The  legal  means  employed  to  enforce  a  right  or  redress  an  injury. 

Rent.     Compensation  for  the  use  of  real  property. 

Rescission.    The  annulling  or  dissolution  of  contracts  by  mutual  consent,  or  by 

one  party. 
Respondentia  Bond.    The  obligation  given  for  a  loan  made  upon  the  cargo  of  a 

vessel. 
Revert.    To  fall  again  into  the  possession  of  the  donor,  or  of  tlie  former  proprietor. 
Right  of  Survivorship.    This  means  that  the  survivor  or  survivors  take  the  right 

or  interest  of  their  deceased  joint  tenant,  which  in  other  cases  would  go  to  his 

heirs. 
Salvage.    Property  saved  from  wreck  or  loss  at  sea;  or  compensation  given  for 

service  rendered  in  saving  it. 

Satisfaction.     Payment  of  a  legal  debt  or  demand;  the  discharging  or  cancelling 
of  a  judgment  or  a  mortgage,  by  paying  the  amount  of  it. 

Scrip.     Certificate  of  stock. 

Seal.     An  impression  upon  any  impressible  substance;   or  a  piece  of  paper  pasted 
on  witli  intent  to  make  a  seal  of  it. 

Sea  Worthiness.    The  fitness  of  a  vessel  in  all  respects  of  materials,  equipment 
and  couhlrucliou  for  the  service  in  which  it  is  employed. 

Set-Off.     A  claim  which  one  party  has  against  another  who  has  a  claim  against 
him;  a  cou n ter -claim. 

Severalty.    A  state  of  separation.     An  estate  in  severalty  is  one  held  by  one  per- 
son in  his  own  right. 

Shipper.    One  who  gives  merchandise  to  another  for  transportation. 

Slander.    Injurious  words  spoken  of  another. 

Smart  Money.    Damages  beyond  the  thing  sued  for,  allowed  on  the  ground  that 
the  offense  may  be  so  great  that  the  offender  ought  to  be  made  an  example  of. 

Specialty.    A  contract  under  seal. 

Statute.    An  act  of  the  Legislature. 

Statute  of  Frauds.    An  English  statute,  generally  re-enacted  in  this  country, 

requiring  certain  contracts  to  be  made  in  writing,  designed  to  prevent  fraud 

and  perjury. 
Statute  of  Limitations.    A  statute  requiring  an  action  to  be  commenced  within 

a  certain  lime  after  the  demand  lias  arisen.     It  limits  the  time  to  sue,  hence  its 

name. 
Stock.    Same  as  Capital  Stock.    It  is  also  used  to  denote  the  shares  into  which  the 

Capital  Stock  is  divided. 
Stockliolder.    The  owner  of  one  or  more  shares  of  the  stock  of  a  corporation. 
Stoppage  in  Transitu.    A  stoppage,  by  the  seller,  of  goods  sold  on  credit  before 

reaching  their  destination  upon  learning  of  tiie  buyer's  insolvency. 
Subject- Matter.     The  thing  to  be  done  or  omitted  in  a  contract. 
Subrogation.     The  substitution  of  one  person  or  thing  in  the  place  of  another, 

particularly  the  substitution  of  one  person  in  the  place  of  another  as  a  creditor, 

with  a  succession  to  the  rights  of  the  latter. 
Suit.     The  prosecution  of  some  claim  or  demand  in  a  court  of  justice. 
Surety.    One  who  has  agreed  with  another  to  make  himself  responsible  for  the 

debt,  default,  or  misconduct  of  a  third  party.     Similar  to  guarantoi'. 


232  GLOSSARY. 

Suretyship.    The  liability  or  contract  of  a  surety. 

Surreiuler  Value.  The  amount  which  an  insurance  company  will  pay  for  an 
unexpired  policy. 

Teuaut.  One  to  whom  another  has  granted  for  a  period  the  use  of  certain  real 
estate. 

Tender.  An  offer  of  a  sum  of  money  in  satisfaction  of  a  debt  or  claim,  by  pro- 
ducing and  offering  the  amount  to  the  creditor  and  declaring  a  willingness  to 
pay  it. 

Tort.  A  private  wrong  or  injury,  other  than  the  breach  of  a  contract,  for  which 
damages  can  be  collected. 

Trespass.     Any  wrongful  act  of  one  person  whereby  another  person  is  injured. 

Trustee.     One  who  holds  property  for  the  benefit  of  another. 

Underwriter.    Same  as  Insurer. 

United  States  Note.  A  written  promise  to  pay  to  the  bearer  on  demand  a  certain 
sum  of  money,  issued  by  the  United  States  Government  and  used  as  money. 

Usury.    Illegal  interest. 

Validity.    Legal  strength  or  force;  the  quality  of  being  good  in  law. 
Valued  Policy.     One  which  fixes  the  value  of  the  property  insured. 
Vassal.    One  who  held  property  of  a  superior  or  lord. 
Vendee.    One  to  whom  anything  is  sold;  a  purchaser;  a  buyer. 
Vendor.    A  seller;  the  person  who  sells  a  thing. 
Void.     Of  no  force  or  effect. 

Voidable.    That  may  be  avoided;  not  absolutely  void. 
Waiver.    The  abandonment  of  a  right,  or  a  refusal  to  accept  it. 
Ward.    A  minor  under  guardianship. 

Warranty.  An  agreement  to  hold  one's  self  responsible,  if  a  certain  thing  does 
nut  turn  out  as  represented. 


FORMS. 


PROMISSORY    NOTE  — ]SON-I?fTEREST  BEARING. 

$325j5^3_  Jamestown,  N.  Y.,  Oct  15,  1901. 

Thirty  days  after  date,  I  pror)iise  to  pay  Walter  H.  Montgomery,  or 
order.  Three  Hundred  Twenty -five  ^V  Dollars,  value  received. 

Charles  E.  Wilson. 


PROMISSORY  NOTE  —  INTEREST  BEARING. 

$450^o_o_  Cleveland,  0.,  Xov.  7,  1901. 

Six  months  after  date,  ice  promise  to  pay  Henry  D.  Kepler,  or  order. 

Four  Hundred  Fifty  Dollars,  value  received,  at  Second  National  Bank, 

with  interest. 

Johnson  &  Brown. 


PROMISSORY  NOTE  — JOINT  AND   SEVERAL. 

$l]24yVo-  Worcester,  Mass.,  Oct.  4,  1901. 

Two  tnonths  after  date,  we  jointly  and  severally  promise  to  pay  William 
Taylor  d  Son,  or  order,  Eleven  Hundred  Tiuentyfour  -^-^^  Dollars, 
value  received,  ivith  interest  at  5^. 

Edward  Thompson. 

Henry  D.  Brown. 

PROMISSORY  NOTE  — NOT   NEGOTIABLE. 

IIOO^V  Providence,  R.  I.,  Dec.  3,  1901. 

ninety  days  after  date,  I  promise  to  pay  Mary  A.  Barton,  07ie  Hun- 
dred Dollars,  value  received,  with  use. 

Samuel  E.  Walker. 

PROMISSORY  NOTE  — DEMAND. 

$250^.  Syracuse,  N.  Y.,  Sejjt.  22,  1901. 

On  demand,  I  promise  to  pay  Tlie  Central  Trust  Comjyany,  or  order, 
Two  Hundred  Fifty  Dollars,  value  received,  with  interest. 

John  W.  Henderson, 
E.  J.  HAYNEf,  Surety. 
2?3 


234  FORMS. 

JUDGMENT    NOTE. 

ISOO^iLCL.  Hartford,  Conn.,  Nov.  15,  1901. 

Three  months  after  date,  I  promise  to  pay  Frastus  Corning  &  Sons,  or 
order.  Five  Hundred  Dollars,  value  received,  luith  interest  at  5<^. 

And  I  do  hereby  confess  judgment  for  the  above  sum,  with  interest  and 
cost  of  suit,  a  release  of  all  errors  and  ivaiver  of  all  rights  to  inquisitio?i 
and  appeal,  and  to  the  benefit  of  all  laws  exempting  real  or  personal  prop- 
erty from  levy  and  sale. 

A.    H.    WOODWORTH. 
CHATTEL,   NOTE. 

$300^0g2g-,  Birmingham,  Ala.,  Aug.  25,  1901. 

On  or  before  Nov.  1,  1892,  for  value  received,  I  promise  to  j^ny  G.  D. 
Lee,  Three  Hundred  Dollars;  to  be  jjaid  said  Lee  at  my  ivarehouse  bij  the 
delivery  to  him  of  wheat,  corn,  and  oats,  at  current  prices,  One  Hundred 
Dollars  worth  of  each  of  the  hinds  of  grain  mentioned. 

B.  T.  Sherman. 

PROMISSORY    NOTE  — INDORSED. 

$129^JL.  Denver,  Col.,  July  7, 1901. 

Thirty  days  after  date,  I  promise  to  pay  C.  E.  Ruthven,  or  order. 
One  Hundred  Twenty-nine  ^V  Dollars,  value  received,  at  TJiird  Na- 
tional Bank,  Chicago. 

W.  H.  Manchester. 


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FORMS.  235 

SIGHT  DKAFT. 

|315t*oV  Brooklyn,  N.  Y.,  Oct.  7,  1901. 

Ai  sight  pay  to  F.  D.  Livingstone,  or  order,  Three  Hundred  fifteen 
^\  Dollars,  value  received,  and  charge  to  the  account  of 

Henry  D.  Stone. 
To  /.  E.  Knoioles, 

Antwerp,  N.  Y. 

ACCOMMODATION    NOTE  — WITH   INDORSEMENTS. 

$250^0^5-  Baltimore,  Md.,  SejJt.  12,  1901. 

One  monih  after  date,   1  promise  to  pay  to  Myself,  or  order.   Two 
Hundred  Fifty  Dollars,  value  received,  at  Merchants  Bank. 

Addison  Parker, 

Written  across  the  back:     Addison  ParTcer,  Wm.  Brown. 

TIME   DKAFT  — ACCEPTED. 

|65_o^.  New  Haven,  Conn.,  iVov.  9,  1901. 

At   ten  days'  sight,  pay  to  B.  J.   Elliott,  or  order,  Sixty-Jive  -^ 
Dollars,  value  received,  and  charge  to  account  of 

Frederick  Q.  Earl. 
To  S.  D.  Morse, 

Springfield,  Mass. 
Written  across  the  fuce  of  the  draft:     Accepted,  Nov.  10,  1901,  Pay- 
able  at  Fourth  National  Bank,  S.  D.  Morse. 

CHECK— CERTIFIED. 

Xo.  315.  Buffalo,  N.  Y.,  Oct.  15,  1901. 

NATIONAL  EXCHANGE   BANK 
OF  BUFFALO. 

Pay  to  Henry  D.  Huntington, or  order, 

Seven  Hundred  Ninety-two  yV^ DoHurs.     $ 792^3^. 

J.  B.  Washington. 

Stamped  or  written  across  the  face  of  the  check:    Good,  F.  B.  Allen, 

Teller. 

GUARANTY  OF  PATn>IENT. 

For  value  received,  I  hereby  guaratitee  the  payment  of  the  rvithin 
jiote.  ^V.  B.  Wheeler. 


336  FORMS. 

GUARANTY  OF   COLLECTION. 

For  value  received,  I  hereby  guarantee  the  collection  of  the  within  note. 

S.  E.  Chapin. 

KECEIPT  — TO  APPLY  ON  ACCOUNT. 

Milwaukee,  Wis.,  Oct.  17,  1901. 
Received  of  B.  C.  Spinning,  Ofie  Hundred  Fifteen  Dollars  to  apply  on 
account. 

L5.00.  Duncan  &  Field. 


receipt  — in  full  of  all  demands. 

Atlanta,  Ga.,  Nov.  H,  1901. 
Received  of  Wilson  &  Sprague,  Seventy -seven  yVo  Dollars  in  full  of  all 
demands  against  them. 

^  '  '  •  1  00* 


His 


Abraham  x  Hines. 

mark. 


RECEIPT  — TO  APPLY  ON  NOTE. 

Burlington,  Vt.,  Sep.  22,  1901. 
Received  of  Armstrong  &  Broivn,  Two  Hundred  Tioenty-five  Dollars 
to  apply  on  their  note  dated  July  1,  1901,  given  to  me,  being  the  same 
payment  which  I  have  endorsed  on  said  note. 
1225.00.  W.  B.  Smithfield. 

DUE  BILL  — PAYABLE  IN  BIONEY. 

l25_oo.  Cincinnati,  0.,  JVov.  10, 1901. 

Due  Amos  R.  Jennings,  'or  order.  Twenty-five  Dollars. 

B.  W.  Franklin. 

DUE  BILL— PAYABLE  IN  GOODS. 

$18-4-"-.  Patterson,  N.  J.,  Dec.  3,  1901. 

Due  R.  D.  Sanderson,  or  oearer.  Eighteen  ^^V  Dollars  in  goods  frofn 

my  store.  .    ^    „ 

^  A.  D.  Hamilton. 

SUBSCRIPTION  PAPER. 

We,  the  undersigned,  hereby  agree  to  pay  the  sums  set  opposite  our  re- 
spective names  to  0.  C.  French,  for  the  purpose  of  building  a  parsonage 
for  the  Westminster  Presbyterian  Church  Society  of  Salina,  Fans. 


Alfred  Wright 


.$500 


Robt.  J.  Moore, 
Corlis  B.  Gardner, 


$200 
200 


FORMS. 


237 


OKDINAKY  FREIGHT    RECEIPT. 


New  York,  Albany  &  Eochester  Railroad  Company. 

Syracuse  Station,  Jan.  4,  1901. 
Received  from  Sherwood  &  Co.,  in  apparent  good  condition: 


MARKED. 


T.  L.  Jones, 


Rocheder, 
N\  y[ 


'S.-^j  .'{i  'c  c  a 

■=>.-' w     .« 
O   C   03         CDJ3 

.o  a  J  oj  o 

S  2  £  g  SO 


DESCRIPTION  OF  PROPERTY. 


^5  hUs.  Salt. 


«  QJ 


—  3  -S  c3  J:; 

-"    .  he  r  -^  .M 

i£  s:a  c3 ::  r  :s 


^go.S  = 


WEIGHT. 


3 


bo 


7500 


As  described  above,  contents  and  value  unknown,  to  be  transported  by  the  New  York, 
Albany  &  Hochester  Railroad  Company,  over  the  line  of  this  Railroad  to  their  ware- 
house at  Rochester,  ready  to  be  delivered  at  said  warehouse,  to  the  consig-nee  or  owner,  and 
if  the  same  are  consigned  to  any  point  beyond  the  line  of  this  Company's  road  ready  to  be 
delivered  at  said  warehouse,  to  the  next  connecting-  Company  or  carrier,  it  being:  expressly 
agreed  that  said  property  is  to  be  transported  upon  and  in  all  respects  subject  to  the  regula- 
tions of  the  published  tarifif  of  said  Company,  and  to  the  conditions  printed  and  endorsed 
hereon,  which  regulations  and  conditions  form  a  part  of  this  contract,  and  the  acceptance 
of  this  contract  is  to  be  deemed  evidence  of  notice  of  all  such  regulations  and  conditions  to 
and  of  assent  thereto  by  the  shipper,  consignee  and  owner  of  said  property;  and  it  being 
further  expresslv  agreed  that  this  Company  assumes  no  liability,  and  is  not  to  be  held  respon- 
sible as  common  carriers,  for  any  loss  of  or  injury  to  said  property  after  its  arrival  at  its 
warehouse  aforesaid,  or  for  any  loss  or  damage  thereto,  or  any  delay  in  transportation  or 
delivery  thereof  bv  any  connecting  or  succeeding  Company  or  carrier. 

W.  A.  LUDOLPH,  Agent. 


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FOEMS. 


RAILROAD   BILI.   OF  LADING. 

International  Transportation  Company. 

FREIGHT   LINE. 


All  articles  entered  on 
this  Bill  of  Lading  shall  bo 
subject  to  and  governed  by 
theClassification  as  published 
by  Railroads,  and  to  the  rates 
properly  belonging  to  such 
classification;  and  the  rates 
as  written  in  below,  shall  only 
apply  to  such  Goods  as  are 
included  in  the  class  opposite 
or  against  which  the  raies  are 
80  written  in. 

MARKS. 


W.  J.  Snell, 

Batavia, 

N.  Y. 

Subject  to  the  order 
of  Merchants  Bank  of 
Geneva,  N.  Y. 


Charges  advanced,  $. 


BILL  OF  LADING  FROM 

Geneya,  N.  Y.,  to  BaiaYia  Depot. 

If  1st  Class,  15  cts.  per  100  lbs. 
If  2d  Class,  13  cts.  per  100  lbs. 
If  3d  Class,  10  cts.  per  100  lbs. 
If  4th  Class,  8  cts.  per  100  lbs. 
If  Special, cts.  per  100  lbs. 


Any  consignment  weighing 
less  than  100  lbs.  will  be  esti- 
mated and  charged  at  100  lbs. 


DEPOT : 

Corner  Court  and  Saint 
Paul  Streets. 


Geneva,  N.  Y.,  Jan.  6,  1901. 

Received  from  A.  Carey  &  Co. ,  in  apparent 
good  order  {except  as  noted]  the  folloioing  pack- 
ages [contents  unknown],  marked  as  in  the  mar- 
qin,  viz: 

10  bbls.  Fish. 

(UNDER  THE  FOLLOWING  CONDITIONS.) 
It  being  expressly  undei-stocd  and  agreed  that  in  considera- 
tion of  issuing  this  through  Uill  of  leading,  and  guarauteeing 
a  through  rate,  the  International  Transportation  Company 
reserves  the  right  to  forward  said  goods  by  any  Railroad  line 
between  point  of  shipment  and  destination.  The  Interna- 
tional Transportation  Company,  or  carriers  over  whose  line 
they  are  transported,  shall  only  be  responsible  as  warehouse- 
men, not  as  common  carriers,  while  the  goods  are  at  any  of 
their  stations  awaiting  delivery  to  the  consignees.  They  will 
not  be  liable  for  any  injuiy  to  any  articles  of  freight  during 
the  course  of  transportation,  occasioned  by  the  weather,  ac- 
cidental delaj-s,  or  natural  tendency  to  decay,  nor  from  any 
lossarisingfromleakage,  improper  packing,  insufiBcient  coop- 
erage or  strapping ;  nor  for  any  loss  or  damage  on  any  article 
or  property  whatever,  by  fire,  or  other  casualty,  while  in 
transit  or  while  in  depots  or  places  of  transhipment,  or  at  de- 
pots or  landings  at  point  of  delivery;  nor  for  loss  or  damage 
by  fire,  collision,  or  the  dangers  of  navigation  while  on  seas, 
rivers,  lakes,  or  canals.  No  responsibility  will  be  assumed  for 
damage  resulting  from  chafing  of  goods  packed  in  bales.  All 
necessary  cooperage  and  bailing  to  be  at  owners'  risk. 

No  guarantee  of  special  time  for  delivery  of  the  goods  is 
given  — Carriages  and  Sleighs,  Eggs,  l-urniture.  Looking 
Glasses,  Glass  and  Crockery  Ware,  Acids,  Machinery,  Stoves 
and  Castings,  Wrought  Marble,  Musical  Instruments.  Liquor 
put  up  in  glass  or  earthen  ware,  and  all  other  frail  and  brittle 
articles.  Fruit  and  all  other  perishable  goods— will  only  be 
taken  at  the  owners'  risk  of  fracture  or  injury  during  the 
course  of  transportation,  loading  and  unloading,  unless  speci- 
ally agreed  in  writing  to  the  contrary.  Gunpowder.  Friction 
Matches,  and  like  combustibles  and  explosives,  will  not  be  re- 
ceived except  by  special  agreement,  and  all  persons  procuring 
the  reception  of  such  freisrht  without  the  knowledge  of  the 
carrier  will  be  held  responsible  for  any  damage  which  may 
arise  from  it.  In  the  event  of  the  loss  of  any  property  for 
which  responsibility  attaches  under  this  Bill  of  Lading  to  the 
carrier,  the  value  or  cost  of  the  same,  at  the  time  and  point 
of  shipment  is  to  govern  the  settlement  for  the  same,  except 
the  value  of  the  articles  has  been  agreed  upon  with  the  ship- 
per, or  is  determined  by  the  c'lassiflcation  upon  which  the  rates 
are  based,  and  said  carrier  shall  have  the  benefit  of  any  insur- 
ance effected  by  or  on  account  of  the  owner  of  such  goods.  It 
is  further  stipulated  and  agreed  that,  in  case  of  any  loss,  detri- 
ment or  damage  done  to  or  sustained  bj'  any  of  the  property 
herein  receipted  for,  during  such  transportation,  whereby  any 
legal  liability  or  responsibility  shall  or  may  be  incurred,  that 
Company  alone  shall  be  held  answerable  therefor  in  whose 
actual  custody  the  same  may  be  at  the  time  of  the  happening 
thereof.  No  claim  will  be  allowed  for  deficiency  or  damage  on 
packages  if  receipred  forin  "good  order"  at  the  point  to  which 
they  are  contracted  by  this  bill.  No  claim  will  be  allowed  that 
arises  from  insufficient  packing  or  incorrect  or  inadequate 
marking.  The  acceptance  of  this  Bill  of  Lading  or  receipt  for 
goods,  made  subject  to  the  conditions  of  this  Bill  of  Lading, 
makes  this  an  agreement  between  the  International  Trans- 
portation Company  and  carriers  engaged  in  transportins-  said 
goods  and  all  parties  interested  in  the  property.  In  witness 
whereof,  the  agent  aflBrms  to  2  Bills  of  Lading.  al"l  of  this  tenor 
and  date,  one  of  which  t)eing  accomplished  the  other  to  stand 
void. 

D.  BAN2fi2fG,  Agent. 


FORMS, 


239 


Remark. — Our  great  railroad  systems  have  incorporated  the  provisions  of  their 
inland  Fieiglit  Bills  and  Bills  of  Lading  with  those  of  ocean  transit  and  the  Bill  of 
Exchange,  calling  the  new  form  a  Foreigu  Bill  of  Lading.  By  iis  provisions  as 
a  contract,  goods  may  be  shipped  to  seabcmrd  and  thence  to  any  foreign  port  at  a 
flat  price  named  at  the  point  of  departure  and  payable  either  there  or  at  the  point  of 
destination.  Thus  all  extra  charges,  frequent  by  old  time  methods,  are  avoided,  and 
the  shipper  here  uses  this  foreign  Bill  of  Ladinffin  its  exchange  character  as  he 
would  use  any  foreign  Bill  of  Exchange,  by  transferring  it  to  any  other  person,  or 
by  negotiating  it  at  a  bank. 


H 

< 
o 

Hi 


< 

0 

< 
o 

H 
H 

< 


Remark. — When  goods  are  ordered  to  be  .^hipped  by  freight,  C.  O.  D.,  the  cus- 
tom is  to  have  the  collection  made  by  a  bank.  The  goods  are  maiKed  with  the 
name  and  address  of  the  consignee,  subject  tathe  order  of  the  bank  by  which  the 
collection  is  to  be  made.  The  shipper  then  procures  a  Bill  of  Lading,  and  having 
drawn  a  draft  on  the  consignee  favor  of  the  hank,  for  the  amount  of  the  goods, 
attachpT  it  to  the  Bill  of  Lading  and  either  deposits  it  in  the  bank  or  leaves  it  there 
for  collection.  Or  he  may  send  it  for  collection  to  some  bank  located  in  the  same 
city  as  the  consignee. 


240 


FORMS. 


FREIGHT   BILL,   AND   FREIGHT   RECEIPT. 

No.  U87.  Buffalo,  Dec.  24,  1901. 

D.  G-.  True  &  Co., 

2^0  The  New  York  Central  and  Hudson  River  Railroad  Company,  ^t. 

No  payment  of  this  Bill  will  be  valid  unless  made  to  the  Freiofht  Agent  at  this  Station,  or  to 
some  person  authorized  by  liim  to  receive  payment  thereof. 

For  Transportation  from  Albany  to  BufTulo. 


1 

One  box  Leather, 

4  50 

Door  U,                                                       

Back  Charges 

No.  Car,  S7Jf2.             Received  Payment, 

2  10 

W.  E    QWO^-^,  Freight  Agent.           % 

6  60 

N.  B.— Payment  will  be  required  on  delivery  of  all  goods. 

No.  U87.  Buffalo,  Dec.  24,  11*01. 

Received^  Dec.  2^,  1892,  from  The  New  York  Central  &  Hudson  River  R.  R. 
Company  the  folloioing packages  in  good  order.  Marked:  D.  Gr.  True  &  Co., 
Baflfalo,  N.  Y., 


One  box  Leather. 


Door  U. 
No.  Car,  87^2. 


Charges,  $6.60. 
D.  G.  TRUE  &  CO. 


FORMS.  241 

KXPRKSS   O.  O.  l>.  KSYELOPH. 

(22)  No.  __ 

Commercial  Express  Company. 


$  31.75 for  Collection. 

I Cliargesfor  Return  of  Money. 

% Total  Amount  to  he  Returned. 


t-'yvyi-ca/i^'Ci(i,    ti>y(K'#»»»*. 


^^'yl,, 


Minneapolis,  Minn.,  1^^.  ^  -^GO-/. 

C.        O.        D. 

Bill  to  be  Collected  on  Delivery  of  Goods. 

Return  proceeds  in  this  Envelope,  Carefully  Sealed,  without 
delay. 

Do  not  deliver  the  whole  or  any  part  of  the  g-oods  accompanying  this 
bill  until  you  receive  pay  therefor ;  and  be  careful  to  notice  wliat  money 
you  receive,  and,  as  far  as  practicable,  send  the  same  as  received,  and 
follow  the  special  instructions  of  the  shippers,  if  any  are  piven  on  the 
bills.  If  p-oods  are  refused,  or  the  parties  cannot  be  found,  notifv  the 
office  from  whence  received,  with  names  and  dates,  and  await  further 
instructions 

Never  forward  C.  O.  D.  packages  beyond  destination  without  direct 
orders  from  the  Shipper,  throug-h  Shipping  Office,  or  until  the  collection 
and  charges  are  paid. 

N.  n.— Tn  cases  where  the  bills  do  not  accompany  goods  marked  C.  O. 
D.,  retain  package  and  write  to  the  office  shipping  the  goods. 

|^"Agentsmust  comply  with  the  above  instructions  in  every  mstance. 


16 


REMARKS. 
Add  return  charges. 


243  FORMS. 

CIKCULAK  LETTER  OF  CREDIT. 

No.  3987. 

ADDRESSED  TO  THE  CORKESPONDENTS  OF 

KnAUTH,    NaCHOD    &    KUHNE. 

^Te-  -v^et^  ■fo-  iUi^^i^e^n,c^   tf--n.rp^    (it    ctt^yt'Vfyve/yi^  'Fa  -mh^/I-  ■Kt'yi.fi  ■a.'t'te--yi. ■ 


rf«*c- 


t^v-» 


«^c/;/     ^^ifu^'it^ii-     ^I'-te-'l'zi'yi.a.     fia-a.i'yta.'t    •^fit     f:2^t'a.'A'l     ^Y«r/%    <■»*     C'  tit' 


JiUiantt'  cSank,  iitfiiied,  ?yQ^ndon,  et^^X  t^ia/t  i?i»  -u^  ^^<^^  ♦»*«;^^*/ 
^  "drawn  under  K.,  JV.  ^  /if's  L\  Credit,  JVo.  3987." 

y/e  ^■n.r^a-a.e'  't^ei.'t  O-tt^'n.  «4«s/^  d^C«-^^'»**e6-/ «*'«^'/%  «a!We  -Atf-yv-o-l,  t^  ^Ip-tKyi,- 
■e^ti'yi;  c^  fie.a.tt^ta.-te-t/  i4^tA,t^  f:2'i-<o  ■yyviyn^-n-a-  ^■Uo^'yv  -i-A-ui-  rta-te-,  -a/rt^  i,B-a,u,«<i.'l 
i*-ot^  'to-   -Ut^-i/-   ■t/i^'yyi'   tt.-t  't^e-  'tei'te.   tt-t  i,v^A^.iyfi.    y.-o^t-t-   ^i.i,t-ic'fi,tt<l e-    rte'^yi^-ci-'yKt     i^-ttt^^ 

^/'Ue.  t€,'y>'i^t4'*2.'t -o-^C  ■e-iz-c'^  ctia-lft  •tfi.t-ui-'t  ^e.  ^'yi^c'l,i^'Ut.ct  ■o-'yt  /A,e-  'Ua.-c-»^  i^  -lA-ui- 
'^'t'f^/l,  a-nt^  ■tt^  -tAt'ii-  ttSe-  i^e-  i^ulA  'to-  <5«s-^^y«»t«*  aJve.ctti.'l  a-'t^^fi'ti.iyyv,  tue-  ■'Ca't't^t 
*-^«-?^  a-^-tH/ftet  -U-^   fi't'tft-C'/i-e-ci   ■t^^    t-^-e-  ■icKi-'t  t/'l-tt^'t  «^«s*««^*. 

to    t-t  't-n.a.'t  't'/ie.    ftt-a.^L'td.    ■'Ue-    (tia-tt-ef/  e^W     -u-ot^i  ^i^-e^e-yi^-e-.    <x-*t-ei 


RfKie-  ti-ee.    ..-- 


J' 


e-  xx/le-,    i^-e^yv't'i^'yyi'e-'yi-/ 

Czo-ti,i   ■o'Ue.eti-e^n.t  O-ei^v-a^i't-'tii-, 

(Signed) 

KNAUTH,  NACHOD  &  KUHNE. 
Holder's  Signature. 


Remark.— Letters  of  Credit  are  usually  on  double  folded  sheets,  on  both  inside 
pages  of  which  appear  blanks  as  given  below. 


FORMS.  243 

SanftmA  mill  l^lmie  mivmie  }xmjimnU  in  ilmiV'  ^r^dev-  fin  ifie^e  j!iu§H, 


Date  vhen 
paid. 

Btj  wtwm  paid. 

Name  of  Town. 

Amount  oaid  expressed 
in  words. 

AmouTtin 
Hgures. 

March  20, 

1901. 

Bank  of  Liverpool, 
Limited. 

Liverpool. 

Fifty  Pounds. 

£  50. 

April  5, 
1901. 

Mag-quay,  Hooker 
&Co. 

Florence. 

One  Hundred  Pounds. 

£  100. 

July  3, 
1901. 

Bancque  Nationaie 
Bulgare, 

Sophia. 

Twenty-five  Pounds. 

£  J&. 

Aug-ust  8, 
19U1. 

Imperial  Ottoman 
Bank. 

Damascus. 

Seventy-five  Pounds. 

£  f5. 

I 

£ 

\ 

£ 

£ 

£ 

£ 

*1 

£ 

£ 

£ 

£ 

£ 

£ 

£ 

£ 

i 

244  FORMS. 

AJ>PBENTICESHIP  AG.KEEMENT  —  GENERAL  FORM- 

©WiS  §^gtf fment  ^Vitncssicth  that  Chester  A.  Gould,  now  fifteen  yeart. 
of  age,  and  with  the  consent  of  his  father,  Setli  H.  Gould,  does  by  these 
oresents  apprentice  himself  to  Martin  D.  Spencer,  engraver,  all  parties  of 
Cleveland,  Ohio,  to  learn  the  art  of  engraving,  from  the  date  hereof  unto 
the  fifteenth  day  of  September,  1907. 

That  he  will  perform  all  the  duties  required  by  laio  of  him,  and  other 
wise  conduct  and  demean  himself  as  a  conscientious,  faithful  and  i7idu 8 
trious  apprentice  ought. 

That  m  consideration  thereof,  said  3farttn  D.  Spencer  does  hereby  cove- 
nant, promise  and  agree  to  use  the  utmost  of  his  endeavors  to  have  said 
apprentice  taught  the  art  of  engraving  aforesaid,  and  to  have  in  the  public 
schools  six  months'  instruction  in  the  common  branches  per  year,  and  in 
the  meantime  provide  said  apprentice  loith  all  necessaries,  including  food, 
lodgino,  clothmq,  laundry  and  medical  attendance,  and  at  the  expiration 
of  saia  term  to  qive  kim  tivo  hundred  dollars  m  cash. 

Ifn  u'itiir.s.isi  xvhfrcof,  said  parties  have  hereunto  subscribed  their  names 
this  hfteenth  day  of  September,  1901, 

Chester  A.  Gould, 
Signed,  Seth  H.  Gould, 

Martin  D.  Speis^cee. 


APPRENTICESHIP  RELEASE. 

%m)x  %\\  pptt  by  S^hris'c  "^xtHXiX^y  that  Chester  A.  Gould,  son  of  Seth 
H.  Gould,  did  by  his  agreement,  bearing  date  September  15th,  1901.  bind 
himself  as  an  apprentice  unto  Martin  D.  Spencer,  of  Cleveland,  Ohio,  for 
a  term  of  six  years  from  date  thereof,  as  by  said  agreement  mme  fully 
appears. 

That  the  said  Chester  A.  Gould  has  since  become  partially  blind,  and 
thus  is  unable  to  accomplish  the  object  of  his  agreement. 

That  by  reason  thereof,  said  Martin  D.  Spencer  does  hereby  release  and 
forever  discharge  said  Chester  A.  Gould,  and  his  father,  Seth  H.  Gould, 
of  and  from  said  agreement,  and  all  service  and  all  other  agreements,  cove- 
nants, matters  and  things  therein  contained,  on  their  or  either  of  their 
parts  to  le  observed  and  performed,  -whatsoever,  to  date  hereof. 

Ifit  aitnf^isi  xchtxtQi,  I  have  hereunto  set  my  hand  this  twelfth  day  oj 

April,  1905. 

Martix  D.  Spencer. 


POEMS.  945 

SUBMISSION  TO   AKBITKATION. 

%now  ^W  itlew  Iiy  ®hcs!r  ^xe^tni^.  That  whereas  a  controversy  is  now 
existing  hetioeen  Philo  Smith,  Sr. ,  and  Joseph  Snyder,  both  of  the  City  of 
Elmira,  N.  Y.,  toxiching  an  alleged  indebtedness  of  the  latter  to  the  former 
for  services  rendered. 

lloiV,  thcrcforf,  we,  the  said  Philo  Smith,  Sr.,  and  Joseph  Snyder,  do 
hereby  submit  the  said  controversy  to  the  decision  and  arbitration  of  David 
Decker,  of  the  City  of  Elmira  aforesaid ;  and  loe  do  covenant  each  with 
the  other  that  ive  will  in  all  things  faithfully  keep,  observe,  and  abide  by 
the  decision  and  aivard  tliat  he,  the  said  David  Decker,  may  nmke  in 
loriting,  in  the  premises,  under  his  hand,  ready  to  be  delivered  on  or  before 
March  15th  1901. 

%\\&,  it  isi  (Jurthf  r  ^j)Vf  f  tl,  by  the  parties  hereto,  that  the  party  that  shall 
fail  to  keep,  abide  by  and  observe  the  decision  and  aivard  to  be  made  ac- 
cording to  the  foregoing  sabmissio7i,  shall  pay  to  the  other  the  sum  of  fifty 
dollars,  as  fixed  liquidated  damages,  and  not  as  a  pencdty. 

Executed  mutually  by  the  parties  to  this  submission  this  first  day 
of  March,  1901. 
Jwjsresewce  o/ Donald  Kennedy.  Philo  Smith,  Sr.     [seal.] 

Joseph  Snyder.       [seal.] 


AWARD   OF  ARBITRATOR. 

®a  %\\  ta  Whom  ©hes^e  "^xt^txiX^  Pajj  ffiame,  I,  David  Decker,  to  lohose 
arbitration  and  aivard  was  submitted  the  matters  in  controversy  existing 
between  Philo  Smith,  Sr.,  and  Joseph  Snyder,  of  the  City  of  Elmira, 
N.  Y.,  as  appears  more  fidly  in  their  ivritten  submission,  bearing  date 
the  first  day  of  March,  1901.  Now,  therefore,  know  ye  that  I,  having 
been  first  duly  sworn  according  to  law,  and  having  heard  the  proofs  and 
allegations  of  the  parties,  and  examined  the  matters  in  controversy  by  them 
submitted,  do  make,  jmblish  and^  declare  this  my  aivard  in  writing  ;  that 
is  to  say,  I  find  Philo  Smith,  Sr.,  is  indebted  to  Joseph  Snyder  in  the 
just  and  full  sum  of  two  hundred  and  ten  dollars.  And  I  direct  and 
award  that  Philo  Smith,  Sr.,  within  one  month  after  service  up)on  him  of 
the  notice  of  this  award,  pay  to  the  said  Joseph  Snyder  the  said  sum  of 
two  hundred  and  ten  dollars,  together  with  the  costs  of  this  arbitration. 

^n  Witnr^'.si  Whcvccrf,  /  have  hereunto  subscribed  these  presents 
this  tivelfth  day  of  March,  1901. 

In  presence  of  Sots.!,  Sisson.  David  Decker,     [seal.] 


246  FORMS. 

I.ANI>   CONTRACT. 

©hijS  §k.flreemtnt  made  and  entered  into  at  Dunkirh,  N.  Y.,  this  fifth 
day  of  December,  1901,  provides  as  follows: 

That  in  consideration  of  the  sum  of  tivo  thousand  {2000)  dollars — to  he 
paid  as  hereinafter  specified — John  Brown,  of  the  city  of  Dunkirk,  N.  Y., 
agrees  to  convey  hy  full  luarranty  deed  to  Norman  C.  Stull,  of  the  city  of 
Buffalo,  N.  Y.,  the  tiventy  acre  tract  of  land  lyitig  four  miles  luest  of  the 
city  limits  of  Dunkirk,  and  knoivn  as  the  hop  yard,  and  described  as 
being  the  southivest  otiefourth  of  the  Stephens  tract,  as  by  map  of  said 
tract  on  file  in  the  office  of  the  clerk  of  Chautauqua  county. 

It  is  further  provided  that  the  land  described  shall  be  conveyed  as  agreed 
on  or  before  Jan.  3,  1902,  and  that  said  Stull  shall,  on  receiving  from 
said  Brown  the  deed  of  conveyance  as  mentioned,  together  with  a  full  and 
comp)lete  abstract  of  title  to  date  of  conveyance  of  said  land,  pay  to  said 
Broimi  the  purchase  price  in  full. 

This  contract  shall  be  binding  upon  the  parties  hereto,  their  heirs,  exe- 
cutors, adininistrators  and  assigns. 
Witness,  (Sigtied,) 

Richard  Peck.  John  Browit, 

Norman"  C.  Stull. 

EMPLOYMENT   CONTRACT. 

SUhiiS  g^fltcemrnt  made  and  entered  into  at  Richland,  Wisconsin,  this 
twe7itieth  day  of  February,  1901,  by  and  betiveen  Jerome  B.  Green,  farmer, 
and  Clayton  Hopkins,  laborer,  both  of  Richland,  Wis.,  provides  as  folloius : 

First. — That  said  Hopkins  shall  work  as  a  farm  hand  on  the  premises 
of  said  Green,  and  as  directed,  in  the  usual  maymer,  and  for  the  usual 
hours  accustomed  in  farm  business,  for  the  period  of  one  year  from  date 
hereof. 

Second. — For  the  services  provided  for,  said  Green  agrees  that  during 
said  year  the  said  Hopkins  may  become  as  one  of  said  Green's  family, 
boarding  and  lodging  thereivith,  and  hdving  all  the  usual  privileges  of 
farm  laborers,  and  at  the  completion  of  the  year's  labor  Green  shall  pay  to 
Hopkins  the  sum  of  two  hundred  and  forty  {2Jfi)  dollars  in  full  for  his 

services. 

Tliird. Neither  party  hereto  shall  have  a  right  to  terminate  this  con- 
tract before  the  expiration  of  the  time,  except  for  cause. 
Witness,  {Signed,) 

Louis  H.  Barnes.  Jerome  B.  Green, 

Clayton  Hopkins. 


FORMS.  247 


PROOF  OF  CI^AIBI. 


^fate  of  iewT  W^K    }  g. 
County  of  Genesee,  f   ' ' 

Jo7m  G.  Cohh,  heing  duly  sworn,  says  that  {the  estate  of  Asa  B.  C. 
Dickinson,  deceased),  or  {the  assigned  estate  of  George  Claioson),  is  justly 
indebted  to  deponent,  in  the  sum  of  one  hundred  dollars  andinterest  thereon 
from  the  10th  day  of  May,  1901,  as  specified  in  the  annexed  account  [or  as 
appears  from  the  note  of  luhich  the  annexed  is  a  copy'\. 

That  the  said  sum  of  one  hundred  dollars  and  interest  is  now  justly  due 
and  otving  to  deponent ;  that  no  payment  has  heen  made  thereon  ;  that  there 
are  110  offsets  thereto;  and  that  the  same  is  not  secured  by  judgment  or 
other  loise. 

Sworn  to  and  subscribed  before  me  this)  TrwTTxr  n     r'r»T,n 

23d  day  of  December,  1901.  \  '^''^^  ^-   ^''^''- 

Selma  D.  Holton, 
«  Notary  Public. 

BUILDING  CONTRACT. 

^(jtefment  made  this  tioentieth  day  of  February,  1901,  between  Walter 
N.  Clark,  of  Batavia,  N.  Y.,  of  the  first  part,  and  Theodore  C.  Spencer, 
builder,  of  the  same  place,  of  the  second  part,  the  said  party  of  the  second 
part  covenants  to  and  luith  the  said  party  of  the  first  part,  to  make,  erect, 
build,  and  finish  in  a  good,  substantial  and  ivorkmanlike  ma?mer,  on  the 
lot  belonging  to  the  party  of  the  first  part,  and  knoion  as  No.  ^  Bank  st., 
in  said  village  of  Batavia,  one  frame  house,  agreeably  to  the  plans  and 
specifications  made  by  A.  J.  Warner,  architect,  hereto  annexed,  of  good 
and  substantial  materials,  by  the  first  clay  of  July  next,  and  the  said  party 
of  the  first  part  covenants  and  agrees  to  pay  to  the  said  party  of  the  second 
part  the  sum  of  five  thousand  dollars  lawful  money,  in  manner  following : 
tivo  thousand  dollars  at  the  beginning  of  said  work  ;  two  thousand  dollars 
more  when  said  house  shall  have  been  completely  roofed,  and  one  thousand 
dollars  more  in  full  for  said  loork  tvhen  the  same  shall  be  completely  finished. 

And  for  the  true  and  faithful  performance  of  eacli  and  all  of  the  cove- 
nants and  agreements  above  mentioned,  the  parties  to  these  ptresents  bind 
themselves,  each  unto  the  other,  in  the  penal  sum  of  one  thousand  dollars, 
as  liquidated  damages,  to  be  jjaid  by  the  failing  party. 

Kn  ^fitnciSiiSi  ^t^hftfof,  We  have  hereunto  signed  our  names  and 
affixed  our  seals  on  the  day  and  year  first  above  loritten. 

Witness.  {Signed,)  "Walter  N.  Clark  [seal. J 

Archibald  Dixon.  Theodore  C.  Spencer     [seal.] 


348  FOKMS. 

ABSTRACT  OF  TITLE. 

Examination  of  Title 

to 

part  of  section  No.  35,  Townsliip  No.  32  S.,  Range  No.  27  E.,  State  of 

Florida. 


1. 


The  United  States  of  America 

to 

Hamilton  Disstofi. 


Land     Patent     Certificate    No. 

10715. 
Dated,  March  30,  1875. 
'  Consideration  $10,000.00. 
Recorded,  April  20,  1875,  in  hooh 

J  of  deeds,  at  page  35. 


Conveys  said  section  35,  tvith  other  property. 
2. 


Hamilton  Disston  and  luife 
to 


Quit  Claim  deed. 
Dated  May  2,  1880. 
)■  Consideration  $5,000.00. 
The  Florida  Land  and  Dnprovement  j   Recorded,  May  20,  1880,  in  hooh 
Company.  J       K  of  deeds,  at  page  53, 

Conveys  said  section  35,  with  other  property. 

S. 

The  Florida  Land  and  Lmprovement  ^    Warranty  deed. 
rnnTnami  Dated,  April  1,  1885. 

^'"'^^''^  .  V  Consideration  $500.00. 

Recorded,  April  10, 1885,  in  booh 
IT  of  deeds,  at  page  351. 


to 
Arthur  G.  Clement. 


Conveys  the  N.  W.  quarter  of  the  S.  W.  quarter  of  said  section  35,  con- 
taining Jfi  acres  according  to  the  government  survey. 

L,  Geo.  W.  Hendry,  Clerh  of  the  Circuit  Court,  in  and  for  the  County 
of  De Soto,  State  of  Florida,  hereby  certify  that  I  have  carefully  examined 
the  records  in  my  office,  and  I  find  nothing  of  record  affecting  the  tille  of 
the  premises  described  in  No.  3,  in  the  foregoing  abstract,  from  and  in- 
cluding March  30,  1875,  in  the  7iames  of  Hamilton  Disston,  The  Florida 
Land  and  Lmprovement  Co.,  and  Arthur  G.  Clement,  other  than  is  set 
forth  in  the  foregoing  three  abstracts,  and  L  further  certify  that  I  find  no 
judgments,  mortgages  or  liens,  or  incumbrances,  from  and  including  said 
date,  against  snid  persons  and  premises,  excepting  as  is  hereinbefore  set 
forth,  to  and  including  this  date. 

Dated,  June  1,  190L  GEO.  W.   HEXDRY, 

[seal.  1  Clerh  of  the  Circuit  Coutr. 


FORMS.  249 


AFFIDAVIT. 


^tate  ot  lew  loth,      ,  ^^ 

County  of  Livingston. 


Augustus  Hamilton,  heing  duly  sworn  {or  affirmed  in  case  tlie  affiant 
objects  to  talcing  an  oath),  according  to  law,  says  that  on  the  twenty-first 
day  of  June,  1901,  Calvin  Perkins,  the  defendant,  worked  the  entire  day, 
laying  hrick  for  him,  the  said  Hamiltofi,  on  his  premises  in  Livonia, 
County  aforesaid. 

Stoornto  and  subscribed  before  me  this  )  Augustus  Hamilton. 

thirtieth  day  of  June,  1901.  ) 

Henry  D.  Kingsbury, 

Justice  of  the  Peace. 


KEIiEASE. 

I,  Samuel  Rogers,  Jr.,  of  Waverly,  Coffey  County,  Kansas,  for  and  in 
consideration  of  the  sum  of  three  hundred  {800)  dollars,  the  receipt  ofiuliich 
is  hereby  acknoivledgrd,  do  hereby  release  and  forever  discharge  Ralph 
Holden,  of  Topeka,  Kansas,  his  heirs,  executors  and  administrators,  of, 
and  from  all  actions,  causes  of  action,  suits,  claims  and  demands  whatso- 
ever to  this  date. 

^\\  '^Vitncs'si  '^tlhcrcof,  /  have  hereunto  signed  my  name  this  four- 
teenth day  of  February,  1901. 
Witness,  Samuel  Rogers,  Jr.     [seal.] 

Edwin  Tucker. 


OATH   OF  OFFICE  — APPOINTIVE   OK  ELECTIVE. 

I  do  solemnly  stoear  {or  affirm)  that  I  will  support  the  constitution  of 

the  United  States,  and  of  the  State  of ,  and  that  I  will  faithfully 

perform,  the  duties  of  the  office  of ,  according  to  the  best  of  my 

ability. 

Elected  officers  take  the  above,  and  with  it  the  following: 
A7id  I  do  further  solemnly  stoear  {or  affirm)  that  I  have  not  directly  or 
indirectly  paid,  offered,  or  promised  to  pay,  contributed,  or  offered,  or 
promised  to  contribute  any  money  or  other  valuable  thing  as  a  considera- 
tion or  reivardfor  the  giving  or  tuithholding  a  vote  at  the  election  at  which 
I  was  elected  to  said  office,  and  I  have  not  made  any  promise  to  injiueyice 
the  giving  or  withholding  any  such  vote. 


350  FORMS. 


WII.L. 


lin  the  pamc  ot  ^ad,  ^mcn,  I,  John  M.  Williams,  of  the  City  of 
Oneida,  State  of  Neiv  York,  being  of  sound  mi7id  and  memory,  and  con- 
sidering the  uncertainty  of  this  frail  and  transitory  life,  do  therefore 
make,  ordain,  piihlish  and  declare  this  to  be  my  last  Will  and  Testament, 
that  is  to  say  : 

First. — After  all  my  lawful  debts  are  faid  and  discharged,  I  give  and 
bequeath  to  my  wife,  Florence  M.  Williams,  in  lieu  of  her  doiver  interests 
ifi  my  estate,  the  property  in  the  City  of  Rome,  N.  Y.,  hnoiun  as  the 
Arlington  Hotel,  together  loith  the  barns  and  grounds  adjoining,  and  all 
appurtenances  connected  therewith. 

Second. — To  my  son,  Charles  S.,  I  give  seventy-one  shares  of  the  capital 
stock  of  the  Oneida  Fruit  Preserving  Company,  which  now  stand  in  my 
nam.e  on  the  books  of  said  company  ;  also  one  thousand  dollars  in  cash. 

TJiird. — To  my  son,  Walter  L.,  I  give  the  farm  known  as  the  Pearl 
Creek  Place,  together  luith  all  the  crops,  stock  and  utensils  which  may  be 
thereon  at  the  time  of  m,y  death. 

Fourth. — To  my  daughter,  Mabel  E.,  to  whom  I  gave  five  thousand 
dollars  January  6,  1889,  at  the  time  of  her  marriage,  I  ?ioio  give  and  be- 
queath only  my  family  carriage  and  carriage  team,  together  with  the  har- 
ness, robes  and  whip  thereioith  belonging. 

Fifth.  —  To  my  daughter,  Grace  B.,  the  wife  of  John  D.  Conkling,  I 
give  and  bequeath  only  my  gold  watch  and  chain,  hereby  intending  to  dis- 
criminate against  her  because  of  her  having  married  contrary  to  my  ex- 
pressed wishes. 

Sixth.  —  To  my  sons,  Charles  S.  and  Walter  L.,  as  trustees,  I  hereby 
give  and  bequeath  the  ten  thousand  dollars  of  U.  S.  Government  bonds 
now  owned  by  me,  the  provisions  of  the  trust  hereby  established  being : 

1.  That  the  iiicome  from  said  bonds  as  it  shall  be  collected  is  to 

applied  solely  to  the  education  of  the  children  of  my  said 
daughter,  Grace  B. ,  the  wife  of  Jolin  D.  Conkling ;  and, 

2.  It  is  further  provided  that  at  the  maturity  and  payment  of 

the  said  bonds,  the  principal  thereof  shall  by  the  trustees 
herein  named  be  reinvested  in  income  bearing  bonds  approved 
by  the  Surrogate  of  Oneida  County  ;  and, 
S.  When  the  youngest  of  the  children  of  my  said  daughter,  Grace 
B.,  shall  become  of  age,  the  trustees  herein  named  shall  sell 
in  the  open  market  such  bonds  as  they  then  hold  as  trustees 
and  divide  the  proceeds  of  such  sale  among  the  children  of 
my  said  daughter,  Grace  B.,  share  and  share  alike. 


FORMS.  351 

SeventJi. — Iherehy  give  and  hequeath  my  laio  libra  n/,  with  all  pamph- 
lets and  notes  in  manuscript  foimd  therewith,  to  the  Law  Library  of  Cor- 
nell University,  at  Ithaca,  New  York. 

Eighth.— All  the  residue  of  my  property ,  both  personal  and  real,  I  give 
and  bequeath  to  my  beloved  wife,  Florence  M.  Williams,  in  addition  to  the 
estate  hereinbefore  mentioned  as  bequeathed  to  her,  and  intend  hereby  to 
name  and  constitute  my  said  wife  my  residuary  legatee. 

LiTceivise,  I  make,  constitute  and  appoint  my  wife  and  my  son,  Charles 
8.,  to  be  co-executors  of  this  my  last  Will  and  Testament,  hereby  revoking 
all  former  Wills  by  me  made. 

Ktt  ^itttei^i^  ^t^hcrrof,  /  have  hereunto  subscribed  my  name  and 
affixed  my  seal,  the  seventh  day  of  February,  in  the  year  of  our 
Lord  one  thousand  nine  hundred  and  one. 

John  M.  Williams,     [seal.] 

The  above  written  instrument  was  subscribed  by  the  said  John  M.  Will- 
iams m  our  presence,  and  acknowledged  by  him  to  each  of  us  ;  and  he  at 
the  same  time  declared  the  above  instrument,  so  subscribed,  to  be  his  last 
Will  and  Testament ;  and  we,  at  his  request,  have  signed  our  names  as 
witnesses  hereto,  in  his  presence  and  in  the  presence  of  each  other,  and 
written  opposite  our  names  our  respective  places  of  residence. 

George  G.  Fleming,  30  Clinton  St.,  Oneida,  N".  Y. 
Mary  T.  Ely,  63  Knox  St.,  Oneida,  N.  Y. 
Robert  S.  Willis,  299  West  Ave.,  Eochester,  IST.  Y. 

CODICIL.  TO  THE   FOREGOING   WILL. 

^heteai^,  /,  John  M.  Williams,  did  on  the  seventh  day  of  February, 
1901,  make  my  Last  Will  and  Testament,  I  do  noio,  being  of  sound  mind 
and  memory,  add  this  codicil  to  my  said  Will  and  to  be  taken  as  a  part 
thereof: 

First. — /  Jiereby  ratify  and  confirm  my  said  Last  Will  and  Testament 
in  every  respect,  save  so  far  as  any  part  of  it  is  inco7isistent  with  or  ex- 
pressly revoked  by  this  codicil. 

Second.  —  Section  second  of  my  said  Will  is  hereby  changed  by  revoking 
that  clause  thereof  ivhich  provided  for  a  bequest  of  one  thousand  dollars  to 
my  son,  Charles  S.;  and  I  noto  hereby  give  and  bequeath  one  thousand 
dollars  to  my  daughter,  Grace  B.  Conkling,  to  he  used  by  her  independent 
of  control  from  her  husband. 

Thi'-d.-  I  do  give  and  bequeath  to  the  trustees  of  the  Central  Presby- 
terian ^^hurch  Society  of  Eochester,  iV.  F.,  to  be  used  for  the  establishment 


252  FORMS. 

a7id  maintenance  of  missions,  the  six  thousand  dollars  that  since  the  exe- 
cution of  my  said  Last  Will  and  Testament  I  have  inherited  from  the 
estate  of  my  deceased  hrotlier,  Roger. 

Iftt  ^tlitncsi.si  ^t'hrvcof,  I  hereto  affix  my  seal  and  signature  this  first 
day  of  May,  in  the  year  of  our  Lord  one  thousand  nine  hundred 
and  one,  and  declare  this  to  he  a  codicil  to  my  said  Will  and 
amendatory  thereof. 

JoHK  M.  Williams,     [seal.] 

The  above  written  instrument  was  subscribed  by  the  said  John  M.  Will- 
iams in  our  presence,  and  acknoiuledged  by  him  to  each  of  us  ;  and  he  at 
the  sa7ne  time  declared  the  above  instrument,  so  subscribed,  to  he  a  codicil 
to  his  Last  Will  and  Testament ;  and  we,  at  his  request,  have  signed  our 
names  as  tvitnesses  hereto,  in  his  presence  and  in  the  presejice  of  each 
other,  and  written  opposite  our  names  our  respective  places  of  residence. 

Williah  H.  Peck,  Cazenovia,  N.  Y. 

Sarah  J.  Browx,  69  Seneca  St.,  Oueida,  N.  Y. 

Walter  A.  Brownell,  125  University  Ave.,  Syracuse,  N.  Y. 


I]:^DEX  TO   FOEMS. 


PAGE. 

Abstract  of  Title 248 

Accommodation  note ..- 235 

Affidavit -- 249 

Affidavit  of  execution  of  conveyance 193 

Apprenticeship  agreement 244 

Apprenticeship  release. - - 244 

Articles  of  agreement 139 

Assignment  of  mortgage ._ -- 204 

Assignment  of  stock  certificate - 161 

Award  of  arbitrator -.- -- 245 

Bank  check - 235 

Bank  draft - --     59 

Bill  of  lading,  land 238 

Bill  of  lading,  water 121 

Bill  of  exchange 59 

Bill  of  sale 91 

Blank  indorsement. — 69 

Bond,  debt  secured  by  mortgage 203 

Building  contract. 247 

Certificate  of  stock,  or  scrip. . . 160 

Certified  check 235 

Chattel  note 234 

Chattel  mortgage 102 

Circular  letter  of  credit 242 

Codicil  to  Will 251 

Continuing  guaranty - '^^ 

Deed,  full  covenant - 192 

Deed,  quit-claim - 194 

Deed,  covenant  against  grantor. 196 

Deposit  ticket ---  237 

Discharge  of  mortgage 205 

Draft,  sight GO,  235 

Draft,  time - - ---  235 

Draft,  accepted - CO,  235 

Draft,  to  accompany  bill  of  lading 239 

Draft,  bank - 59 

Due  bill - --. - 236 

Employment  contract - 246 

Express  C.  O.  D 241 

Freight  receipt t 237 

Freight  bill 240 

Full  indorsement ^9 

253 


254  INDEX   TO    FORMS. 

Guaranty,  continuing - -    78 

Guaranty  of  payment -- 235 

Guaranty  of  collection. ---. -  236 

Inland  bill  of  exchange - 59 

Indorsement,  blank - -     69 

Indorsement,  full -  - 69 

Indorsement,  qualified - -  - 69 

Indorsement,  restricted -  - 69 

Judgment  note --- - - 234 

Land  contract - -- 246 

Letter  of  credit,  circular 242 

Lease - --- 207 

Memorandum  of  sale 91 

Mortgage,  land -- --- --- 199 

Mortgage,  chattel 102 

Mortgage,  interest,  insurance  and  tax  clauses 199 

Note,  accommodation  — —  235 

Note,  payable  to  bearer 233 

Note,  payable  to  order  of  payee 55 

Note,  joint  and  several. 233 

Note,  interest  bearing - 233 

Note,  non-interest  bearing 233 

Note,  not  negotiable 233 

NotC;  demand - 233 

Note,  chattel-. 234 

Note,  judgment 234 

Notice  of  protest 75 

Notice  of  dissolution  of  partnership. - 153 

Notice  of  steppage  in  transitu 93 

Notice  to  tenant -. 211 

Notice  to  landlord 211 

Oath  of  office. 249 

Partnership  agreement 139 

Power  of  attorney 127 

Protest  for  non-payment - 74 

Proof  of  claim 247 

Proxy  to  vote  for  officers  of  corporations 165 

Qualified  indorsement 69,  234 

Restricted  indorsement 69,  234 

Receipt,  ordinary  freight 237 

Receipt,  money -  -  -  236 

Release - 249 

Sight  draft ---  235 

Submission  to  arbitration -  -  -  245 

Subscription  paper 236 

Waiver  of  notice - -  -  -     76 

Will - - 250 


I 


IISTDEX. 


A.  PAGE. 

Abandonment -  182 

Absence  of  debtor 42 

Acceptance  of  proposition 19 

of  draft 61 

Accident  insurance 177 

indemnity 177 

injuries -.  177 

proof  of  injury 178 

Accommodation  paper 56 

Accord  and  satisfaction 24,  48 

Acknowledgment 197 

Actions - 217 

criminal --  217 

civil --..  217 

parties  to 217 

Adequacy  of  consideration 24 

Adjustment  of  loss 173,  182 

Agency, 

general  principles 127 

liability  of  parties -.  134 

dissolution 130 

Agent, 

definition  127 

appointment 127 

authority 129 

special 129 

general 129 

implied  powers -  130 

notice  to 130 

liability 135 

Agister  Ill 

Alien  enemies 17 

Appeal 223 

Appurtenances 187 

Arbitration  and  award 49 

Articles  of  copartnership 139 

Assent 19 

implies  what 21 


PAGE. 

Assignment, 

fraudulent 30 

of  partnership  interest 151 

of  policy 172,  177 

of  chose  in  action 68 

of  patents 184 

of  mortgage... 204 

Auction  sales... 30,  94 

puffers  or  by  bidders  at 30,  94 

Average  general 123 

Award 49 

B. 

Baggage 117 

Bailee 105 

Bailiff 215 

Bailment 105 

definition 105 

kinds. 106 

Bank  bills 68 

Bankruptcy 131 

Beneficiary 175 

Bets 29 

Bills  of  exchange 59 

foreign 60 

inland  60 

aoceptance  of 61,  63 

Bill  of  lading 121 

use  of 123 

Bill  of  sale 91 

Blank  indorsement 69 

Boarding  house 114 

Breach  of  contract 33 

Breach  of  warranty 98 

By  bidders 30,  94 

By-laws  of  corporations 166 

C. 
Capital  stock 169 


255 


256 


IHTDEX. 


PAGE. 

Carrier, 

private Ill 

common 117 

of  passengers 117 

Cashier's  check 67 

Caveat  emptor 97 

Certificate  of  deposit 66 

Certification  of  check 66 

Change  of  venue ...  220 

Charter  of  corporations 158 

Charter  party 120 

Chattel  mortgages lOl 

form 102 

recording . . 103 

foreclosure 103 

Checks 64 

certification 66 

presentation  for  payment 65 

use 64 

form 64 

negotiability 65 

forged - 66 

liability  of  parties 65 

cashier's 67 

Civil  actions 216 

Civil  law 5 

Civil  remedies 32 

Clerk  of  court... 215 

Collection,  guaranty  of 78 

Commission,  bailment  of 107 

Common  carriers, 

duties 115 

liabilities  _ 115 

charges 116 

delivered  by 116 

Common  lavr 6 

in  United  States 6 

Community  of  profits... 147 

Compound  interest... 85 

Concealed  partner —  145 

Conditional  proposition 20 

Conditional  sales lOfl 

Consent,  to  contracts 19 

Consideration, 

definition 23 

good 23 

valuable  23 

adequacy  of -     24 

executed --     25 


PAGE. 

insufficient 25 

failure  of 26 

Continuance 220 

Continuing  guaranty 78 

Contracts, 

definition   9 

conditions 9 

specialty 9 

parol  10 

written   10 

oral 10 

express  10 

implied 11 

executed 11 

executory ....     11 

entire 11 

divisible 12 

void  and  voidable 13 

Contributory  negligence 118 

Copyright 185 

how  obtained 185 

infringement 186 

Corporations 

importance 157 

object 157 

sole 157 

aggregate ..  157 

religious 158 

lay    158 

elemosynary 158 

civil 158 

public 1 58 

private 158 

creation  of 158 

powers 163 

stock 159 

by  what  law  governed  _ 161 

dissolution... 161 

mode  of  contracting 163 

succession 163 

seal 164 

suits 164 

ofiicers 165 

by-laws 166 

Co-sureties -     80 

Courts, 

object... 212 

jurisdiction   212 

federal -  212 


INDEX. 


257 


PAGE. 

State 214 

officers 215 

terms -- 215 

Criminal  actions 217 

Criminal  law -      5 

Criminal  remedies. 32 


Damages - 33 

liquidated - 34 

remote - —     34 

speculative -- —    34 

exemplary   - - .     35 

in    contracts    for    payment    of 

money..-- --    33 

in  contracts  for  sale  of  goods —    33 
in  actions  for  services 34 

Days  of  grace 53 

Death, 

effect  on  agency 132 

effect  on  partnership 152 

effect  on  joint  stock  companies.  156 
effect  on  corporations 163 

Debtor,  absence  of --     42 

Deeds - 192 

warranty -  192 

quit  claim 194 

execution -  196 

acknowledgment 197 

delivery 197 

recording 197 

of  trust ---  206 

Defenses 

definition   37 

statute  of  frauds 37 

statute  of  limitations 41 

performance 45 

payment 46 

tender --    47 

accord  and  satisfaction 48 

arbitration  and  award 49 

alteration -    49 

pendency  of  another  suit 49 

set  off 50 

Delivery -  -     92 

by  carrier -  116 

Demand   '''2 

Demurrage - -  121 

Demurrer 219 


PAGE. 

Deposit,  bailment  of 106 

certificate  of 66 

Depositions 220 

Diligence, 

degrees  of 105 

application  to  bailments 106 

Disability  of  creditor 42 

Disability  to  contract 13 

Disaffirmance 

by  infant -     15 

by  principal 135 

Dissolution 

of  agency 130 

of  partnership 150 

of  corporations 161 

Divisible  contracts 12 

Dormant  partner 145 

Dower 189 

Draft,  see  bill  of  exchange 

Drunkards 14 

Duress 21 

E. 

Easements   190 

Estates  in  land, 

for  life 188 

fee  simple - 188 

reversion 189 

Entire  contracts 11 

Executed  contracts 11 

Executed  consideration 25 

Executed  sales 88 

Execution 35,  221 

Executory  contracts -    11 

Executory  sales -    88 

Exemplary  damages 85 

Express  contract 10 

F. 

Failure  of  consideration 36 

Federal  courts 212 

supreme  213 

appeals 213 

circuit. - 213 

district 214 

Fee  simple,  estate  in 188 

Fire  insurance 

insurable  interest 168 

policy  168 


258 


INDEX. 


PAGE. 

premises 168 

risk -  169 

amount  insured 170 

reinsurance 173 

time  to  continue 171 

premium 171 

representations 171 

warranties   171 

conditions 172 

adjustment  of  loss 173 

Firm  name 144 

Fixtures. -- 210 

Foreclosure, 

of  chattel  mortgage 103 

of  real  estate  mortgage 205 

Foreign  bill  of  exchange 60 

Forgery 57 

Fraud, 

in  contract 21 

on  guarantor 81 

Frauds,  statute  of 37 

Fraudulent  sales -  94 

Full  covenant  deed 192 

G. 

Garnishee 218 

General  average 123 

Good  consideration 23 

Good  will. 28 

Grace,  days 53 

Guaranty  and  suretyship.. 77 

of  payment _  77 

of  collection 78 

continuing 78 

Guest 113 

H. 

Highways 190 

Hire,  bailments  for 110 

of  things 110 

of  services 110 

of  custody Ill 

of  carriage Ill 

Hotel,  see  innkeeper 

I. 

Idiots.. 14 

Illegal  subject  matter 27 


PAGE. 

restraint  of  trade 27 

restraint  of  marriage 28 

marriage   brokerage 28 

perversive  of  acts  of  government  28 

obstructive  of  course  of  justice.  29 

immoral .  29 

fraudulent 30 

Immoral  contracts 29 

Implied  contracts, 

definition    11 

frequency  of... 11 

Incompetency  to  contract 13 

Indorsement, 

methods  of 69 

definition 68 

in  full. 69 

in  blank 69 

without  recourse 70 

restrictive 70 

Indorsers  liability 69 

Infringement 

of  patent 184 

of  trade  mark 185 

of  copyright 186 

Infants 15 

Injunction 35 

Inland  bill  of  exchange 60 

Innkeeper 113 

duties 113 

liability 113 

lien 114 

Insane  persons 13 

Insolvent  laws... 30 

Insufficient  consideration 25 

Insurable  interest, 

in  property 168 

in  life .-  175 

in  marine  insurance 179 

Insurance, 

fire 168 

life .-  175 

marine 179 

Interest, 

definition   88 

legal  rate 83 

on  what  allowed 84 

compound — 85 

Interstate  commerce  law 125 


INDEX. 


;i59 


J. 

PAGE. 

Joint  slock  companies 155 

formation 155 

liability  of  stocliliolders 155 

conducting  business 156 

Judgment 33,  223 

Jury 231 

L. 

Lading,  bill  of 131 

Land  contract 198 

Landlord,  see  innkeeper, 

Landlord  and  tenant... 207 

execution  of  lease. 207 

term 207 

rent 208 

lessors  rights 209 

lessees  rights 209 

repairs 210 

fixtures -  310 

recovering  possession. 211 

notice  to  quit. 311 

notice  to  landlord 211 

Law, 

definition   5 

criminal   5 

civil 5 

sources 6 

common .-       0 

statute —      7 

national 7 

and  property.- 7 

Lay  corporation 158 

Lease,  see  landlord  and  tenant 

Legal  rate 83 

Legal  tender.. 46 

Letter  of  credit 63 

Lien, 

innkeepers m 

bailies  for  service Ill 

common  carriers .-  116 

Life  insurance, 

definition    175 

insurable  interest 175 

fraud  and  concealment 175 

conditions 176 

assignment  of  policy .-  177 

proof  of  death. 178 

Liquidated  damages.. 34 


PAGE. 

Limitations,  statute  of 41 

Limited  partnership 143 

Loans  for  use 107 

Loans,    maritime 123 

Lobbyists,  contracts  for  services  of  38 

Lost  negotiable  paper 57 

Lucid  intervals 14 

Lunatics 13 

M. 

Maker  of  note 55 

Marine  insurance 

insurable  interest 179 

risk... 180 

duration  of  risk 180 

assignment  of  property 181 

warranties   181 

disclosures 183 

concealment 183 

abandonment 183 

adjustment 183 

return  of  premium 183 

amount  insured 180 

Maritime  loans 133 

Marriage, 

contracts  in  restraint  of 38 

agreement,  in  consideration  of. .  38 

brokerage  contracts 88 

Married  women 16,  133 

Minors,  see  infants. 

Mistake 23 

Mortgaged  premises,  sale  of 203 

Mortgages, 

Chattel 101 

real  estate 199 

■     N. 

National  law... 7 

Necessaries  of  life 16 

Negligence, 

degrees  of 116 

contributory 118 

of  carriers  as  to  third  parlies...  118 

Negotiable  paper, 

characteristic 51 

necessary  conditions 51 

transfer 68 

New  promise 

to  pay  outlawed  claim 43 


260 


INDEX. 


PAGE. 

New  trial 222 

Note,  promissory 55 

Notice, 

of  noa  payment 75 

of  non  acceptance 75 

to  agent 130 

O. 

Obligation,  moral 25 

Obscene  publications 29 

Offer  -.     19 

Officers  ef  corporations, 

election 165 

duties 166 

amotion 166 

Oral   contracts.- 10 

Oral  proposition 19 

Ostensible  partner 145 

Outlawed  debts,  see  statute  of  lim- 
itations. 

P. 

Parol  contracts 10 

Parties  to  contracts -  13 

Parties  to  actions 217 

Partners, 

real 145 

concealed 145 

limited 145 

nominal 146 

power  of 146 

agreements  between 147 

liability  of. - . .  148 

Partnership, 

definition 189 

formation 139 

limited -  -  -  143 

partners 145 

community  of  profits 147 

duration 150 

ownership  of  capital 148 

dissolution -.  150 

suits  at  law .-  149 

sharing  of  losses. 148 

Passengers,  carriers  of 116 

Patents 184 

who  may  obtain 184 

assignment 184 

infringement 184 


PAGE. 

Payee 55 

Payment 46 

Per  cent 83 

Performance, 

defense  of 45 

specific 35 

Personal  property 87 

sales  of 87 

bailments  of 105 

Pledge 108 

Pleadings  217 

Policy  of  insurance 168 

assignment  of 172,  177 

Power  of  attorney 127 

Premium, 

fire  insurance..- 171 

marine  insurance 182 

Presentment, 

bills  of  exchange 72 

checks 65 

Price 89 

Principle  and  agent.. 127 

Profits , 147 

Promissory  note. 55 

Property, 

personal 87 

real 187 

law  and 7 

Proposition, 

oral- 19 

written 20 

conditional 20 

general 20 

Protest 73 

Public  policy, 

contracts  against 27 

Q- 

Quit  claim  deed 194 

R. 

Ratification  of  contracts, 

by  infants 16 

by  principal 135 

Railroad  transportation 124 

Real  estate  conveyances, 

deeds 192 

mortgages 199 


INDEX. 


261 


PAGE. 

Real  estate  mortgages 199 

assignment - 204 

recording 204 

discharge 204 

foreclosure 205 

execution 206 

subsequent 206 

Real  property 187 

rights  to - ---  187 

estates  in 188 

Recording  of  deeds —  197 

Recording  of  mortgages, 

chattel  _ ---  103 

real  estate ---  204 

Remedies -.     32 

criminal 32 

civil -     32 

Remote  damages 34 

Renunciation  of  authority  by  agent  151 

Rent 208 

Reporter 215 

Restraint  of  marriage 28 

Restraint  of  trade -  -     27 

Revocation  of  agency ---  130 

Risk  in  insurance, 

change  of 169 

duration  of -  180 

fire  insurance 169 

marine  Insurance 180 

8. 

Sale  of  mortgaged  premises 203 

Sale  of  personal  property, 

definition 87 

executed 88 

executory 88 

on  trial... .-  100 

by  sample 98 

necessary  conditions 88 

conditional 100 

bill  of 91 

Salvage 124 

Sample,  sales  by 98 

Seals, 

of  corporations 164 

on  contracts 9 

deeds 196 

Setoff -    50 

Sheriff 215 


PAOB. 

Shipping, 

definition  120 

charter  party 130 

responsibility  for  losses. 122 

general  average 123 

maritime  loans 122 

and  railroad  transportation 124 

Sight  draft 61 

Signature 52 

Special  agent 129 

Specialty,  contracts  by 9 

Specific  performance. 35 

Speculative  damages. 34 

State  courts -  214 

supreme --  214 

district 214 

justices 215 

probate ---  215 

Statute  law 7 

Statute  of  frauds .-  37 

requirements 37 

meaning. 38 

in  sales  of  personal  property...  90 
Statute  of  limitations, 

definition 41 

provisions 41 

beginning  of  period 41 

disability  of  creditor. .  42 

absence  of  debtor.. 42 

new  promise. 43 

part  payment.. 43 

affecting  collateral  security 44 

law  of  place 44 

Stenographer 215 

Stockholders  in  corporations, 

disfranchisement 168 

liability  of 167 

Stock  in  corporations, 

agreements  to  take 159 

issue  of. 159 

transfer 160 

Stolen  paper 57 

Stoppage  in  transitu 92 

Streams 190 

Subject  matter, 

definition  27 

legality 27 

illegality 27 

Subrocation 79 


262 


INDEX. 


PAGE. 

Suits  at  law 32 

Summons --  218 

Sunday, 

desecration 29 

contracts  made  on 29 

Surety 79,  80 

T. 

Telegraph  companies 118 

riglits  and  duties 118 

liability 118 

Tenant,  see  landlord  and  tenant. 

Tender  of  payment 47 

Tender,  legal 46 

Title, 

warranty  of 97 

transfer  of 91 

Torts 35 

Trade  marks 185 

how  acquired 185 

infringement 185 

Trade,  restraint  of 27 

Transfer  of  negotiable  paper 68 

Trial,  sales  on. 100 

Trial,  at  law. 231 

new 222 

U. 

Usury, 

definition  _ 84 

penalty   for 85 


V. 

PAGE. 

Valuable  consideration 23 

Venue,  change  of 220 

Verdict 221 

Void  and  voidable  contracts 13 

W. 

Wager 29 

Waiver  of  notice  and  protest 76 

Warehousemen Ill 

Warranty, 

express  --     96 

implied 96 

of  title. 97 

of  quality --   -    97 

breach  of 98 

in  fire  insurance —  171 

in  marine  insurance 181 

Warranty  deeds. 193 

full  covenant 192 

simple --- 194 

Wharfinger - HI 

Withdrawal  of  offer 20 

Without  recourse,  indorsement. .     70 

Witnesses --  220 

Written  contract 10 

Written  proposition 20 


I 


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I 


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